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Donor-Advised Funds

A Donor Advised Fund (DAF) is a kind of charitable checking account: you fund it with cash, stocks, or other assets, and receive an immediate tax deduction when you do so. After funding the account, you can choose an investment strategy to grow your philanthropic dollars over time. You then decide where to direct this giving, and how best to support the work of your favorite charities, like Mercy Home.

There are many situations where a DAF might be a great tool for you to consider. Here are a few:

You have a year with higher income, possibly because of increased wages, an inheritance, or sale of property.Offset your higher tax bill by opening a DAF and receiving an immediate charitable deduction.
You don’t qualify for the standard deduction. (In 2021, that’s $12,550 for singles and $25,100 for married couples filing jointly.“Bunching” your charitable giving for two or more years into one. For instance, you and your spouse could put $25,000 into a DAF this year, take the charitable deduction on your taxes, and distribute charitable gifts for the next few years
You’d like to start a family foundation, but don’t want the additional regulatory and administrative responsibilities that come with it.Many families now choose a DAF instead of a family foundation because of its flexibility and ease of use. Your fund can carry your family name. You can choose a successor to manage the funds once you pass on. A DAF is a simple way for you and your family to support multiple charities for generational giving.

To set up a DAF, you’ll first need to find a provider. You might consider your local community foundation or financial institutions you currently have accounts with. Minimum contributions vary, often ranging from $5,000 to $25,000 to start.

Once established, making a gift out of it is very easy. You can make gifts out of your DAF for as low as $50 at a time.

“That’s one of the great things about the [DAF] fund—it allows you to bypass the tax man and makes available more funds to support the charitable causes you believe in. We continue to support Mercy Home because we value the compassionate care for these very vulnerable children who have very few resources.”

– Tim and Karen

Further Reading

Mercy Home’s Director of Philanthropy, Phil Zielinski, is one of four experts who speak on donor-advised funds in this article from Crain’s Chicago Business.

How to simplify your giving with a donor-advised fund.

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Philanthropic information presented herein is intended for friends and supporters of Mercy Home for Boys & Girls. This material may be helpful in your tax and financial planning, and is based on current laws and recent court decisions. You should consult your own legal, tax, or financial planner to determine how these gift vehicles may apply to your own situation.