In return, the donor gets relief from the hassles of compliance facing family foundations. They can start a DAF with relatively tiny amounts compared to what is need to justify the expense of a private foundation. Donors can still name the fund after their family. Plus, the immediate tax deduction allowed for donations to the DAF is a larger percentage of the gross income than that allowed for private foundations.
Many financial services giants offer DAFs. Fidelity Charitable made 519,000 grants averaging over $4,000 each in 2013, Vanguard Charitable has cut checks to over 142,400 charities in the last decade, and Schwab Charitable paid out $822 million for the 12-month period ended June 30.
This time of year, you are bound to hear more about these funds because their PR departments are particularly active. You should definitely consider them if a DAF is of interest to your clients.
There is no doubt in my mind that DAFs offered by the financial services industry do a fine job even on a local level, but given the tremendous positive impact on donors and their communities from localized efforts, I want to encourage you to look for and at your local community foundation, too.
A Community Foundation (CF) is in the same business as donor-advised funds and private foundations. It makes grants to worthy recipients. One difference is community foundations have intense local focus. Want to know who is doing what for whom in your area in the not-for-profit world? Go see the director of your community foundation.
What you are likely to find is several organizations doing great work that you never would have known about otherwise. Some organizations are new or lacking enough resources to make themselves better known. The governing board of the CF is likely comprised of local leaders, professionals, and business leaders who are keen on making your community better.
Your clients can enhance their financial planning efforts through charitable gifts by establishing a DAF at their community foundation. They can boost their personal impact by getting to know those locals who provide services in areas that are important to them. If they are already involved, your clients may be able to help an organization they care about apply for a grant and get additional funds.
It can be a fantastic experience similar to what has happened to me over the years with the Foundation for Financial Planning. It isn’t just writing a check or donating shares any more. It’s about leverage and impact -- impact on the bottom line of the 1040 but more than that, impact on the recipients and impact on the donor.
To learn more about the Foundation for Financial Planning and volunteer opportunities click here.
To donate or make a pledge to the FFP, click here. (Pledges of $1,000 or more are eligible to be matched by Fidelity and can be paid over 5 years.) To find a Community Foundation near you, click here for the Council on Foundations locator.
Dan Moisand, CFP, has been featured as one of the America’s top independent financial advisors by Financial Planning, Financial Advisor, Investment Advisor, Investment News, Journal of Financial Planning, Accounting Today, Research, Wealth Manager, and Worth magazines. He practices in Melbourne, Fla. You can reach him at [email protected]