Donor-Advised Charitable Mutual Funds
by Cara Scatizzi
Giving to charity is important to many individuals for a variety of reasons. But an added incentive is the tax benefits.
Donor-advised funds are mutual fund-sponsored programs that administer charitable-giving programs on behalf of individual participants, who can direct which charities should receive their contributions. The funds offer one way for you to maximize your charitable deductions, allowing you the opportunity to take a deduction upfront before choosing specific charities, as well as the opportunity to donate appreciated securities rather than cash to sidestep capital gains taxes.
In this article
- How It Works
- Making Grants
- Fees
- How to Invest
- Investor Suitability
- Tax Implications
- The Pros
- The Cons
- Additional Information
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How It Works
In a donor-advised charitable program, investors make an irrevocable contribution to the donor-advised account and receive an immediate tax deduction. Typically, the money in the account is invested in various mutual funds that are selected by the donor. The money in the account grows tax-free, and is distributed to charities that are requested by the donor, under a donation-granting program determined by the donor.
Most large mutual fund companies have these types of funds. You can also find religious organizations and smaller companies that offer donor-advised funds as well. The typical minimum initial investment ranges among fund companies (typically from $5,000 to $25,000). Minimum additional contributions range from $500 to $5,000.
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