Advice
What this video’s about:
The 1st Source Bank Donor-Advised Fund helps our clients simplify their charitable giving. It is designed to best assist clients who are charitable and give an excess of $10,000 a year to charity. It is also extremely helpful for clients who might have a high-income year or experienced a liquidity event, like the sale of a business.
How does a donor-advised fund work?
After opening a donor-advised fund, clients contribute appreciated securities or cash to the account. The client then gets an immediate tax deduction, which can be helpful in the situations listed previously. The 1st Source Investment Management Group will invest the assets and the client or grant advisor requests grants to charities of their choosing over any given time.
Are there other options?
The donor-advised fund is one way to make charitable gifts. Other options include charitable trusts, community foundations and family foundations. The major advantage of the donor-advised fund is just how simple it makes giving. One of the reasons 1st Source began offering the donor-advised fund is to bring simplicity to the giving process. We like to make things easier on our clients! Family foundations, charitable foundations and trusts are all wonderful tools for certain people and situations, but they generally involve adding other individuals and complexity to the process.
Community foundations may limit the organizations you are allowed to support like those that are within their community, which is of course is a wonderful thing to do. But, if an individual’s charitable mindset is to support 501(C)(3) organizations that are outside of the community, then the community foundation might not be the best fit. If your intent and legacy goes beyond local charities, then maybe a trust or family foundation would more appropriate. There is more complexity to this option because you would need a document drafted by an attorney. Additionally, an accountant would likely be involved to prepare annual tax returns, which the foundation would need to do for the remainder of its existence. The donor-advised fund does not require a tax return be filed annually. You do not need an attorney to set it up, 1st Source can do that for you. After you fund it, use as you see fit. Simple.
What happens to the donor-advised fund when I die?
With your standard will and trust, your assets are divided at your passing. The donor-advised fund can do the same. It will distribute the remaining assets to charities or organizations of your choosing. The approach that many of our clients are taking is to include family members early on. Parents are getting their sons, daughters and even grandchildren involved now to talk about organizations they are passionate about. Some sit down during the holidays to talk about the organizations they want to support to begin passing on their charitable family legacy. After the parents have passed away, their children continue their charitable legacy.
If you are interested in learning more about donor-advised funds, contact Justin Cohee, J.D., Vice President, and Trust Officer in The Family Office by calling 574-235-2752 or send an email to [email protected].
This information is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Clients should consult their own tax, legal and accounting advisors before engaging in any transaction.
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