The Easiest Way to Start Philanthropic Investing

The Easiest Way to Start Philanthropic Investing

April 19, 2021

According to the National Philanthropic Trust’s 2015 report on donor-advised funds (DAFs), total assets managed by such accounts in the year prior stood at an all-time high of almost $71 billion. The same report noted that total contributions to (almost $20 billion) and grants made from (just under $12.5 billion) DAFs also stood at all-time highs as of the end of 2014. If you have ever thought that you cannot become a philanthropist because you are short on time or lack the assets, think again!


DAFs could be just the right place for you to start your charitable giving. 


What Is a DAF?


A DAF is a philanthropic investment account administered by a public charity, called the sponsoring organization. It allows you as an investor to make an irrevocable contribution of personal assets to an account with that organization. Though the charity then has legal control of the account, you or a named representative can still advise the organization on investing the assets within and distributing gains to your preferred charities. 


The Benefits


The amount of money needed to start a DAF is very low–as small as $5,000–which can present less of a barrier to aspiring philanthropists. Also, of great help to those big in heart but short on time, the sponsoring organization takes the largest chunk of the administrative work from your plate.


When you contribute to a DAF, you immediately receive the maximum deduction that the IRS allows–a great advantage to your overall wealth management strategy. Any funds then invested grow tax-free. But the proverbial cherry on top is that you have complete freedom to choose when to make donations from the investments because there is no legal time constraint to do so.


Most sponsoring organizations have a variety of investment options. Our Personal advisors at Wendell Charles can provide suggestions on an appropriate mix of diverse investments to hold for the long term based on your individual situation.


A Proviso


There is no guarantee that funds invested within a DAF will appreciate. Also note that some financial institutions charge fees that can take away from the total assets available to donate. For this reason, it is vital that you work with experienced financial advisors: those who are able to make suggestions for investment and distribution that can help benefit you and seek to maximize the possible contributions to your chosen charities.


To that end, if you are considering the world of philanthropy, we would be humbled and honored if you would give us a chance to help you with financial advice around this noble pursuit. Book a meeting today to talk with one of our friendly wealth management professionals about starting a DAF.


Important Disclosure:


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.