Contributions to these charitable-giving vehicles surged
23.5% in 2013, according to an annual report by the National Philanthropic
Trust of Jenkintown, Pa. At year-end, total charitable assets in the
accounts were a record $53.7 billion, up 19.8% from a year earlier. Donor-advised
funds enable investors to take an immediate tax deduction on money they set
aside to grow tax-free until deciding which charities will be getting grants.
A lot of the 2013 gains were driven by people making gifts
of highly appreciated public securities which itself manages $2.1 billion in
charitable assets in donor-advised funds. When people give appreciated
securities to a donor-advised fund or directly to a charity, they can usually
deduct the full market value of the securities and avoid paying capital-gains
tax on the amount by which they have grown in value.
Giving through donor-advised funds has become more popular
as it gives taxpayers a lot of flexibility. If an investor wants to lighten up
on an appreciated holding, for instance, it’s an easy way to not pay tax on the
gain and let it go out to charity over time.
Another option is to use appreciated shares rather than cash
for donations and then repurchase the same stock. That way an investor could
hold on to a favored stock, but end up with a higher cost basis in the shares.
Donor-advised funds allow people even with limited means to
feel as if they are investing like a Rockefeller, it makes it feel like you
have a formal giving program…as opposed to just writing a check. For some
people, another advantage of using a donor-advised fund is that donations can
be made anonymously.
There are more than 217,000 donor-advised fund accounts, up
5.7% from 2012. The report examined 2013 data from more than 1,000
donor-advised funds. National Philanthropic Trust is the fourth largest
donor-advised-fund sponsor. The largest funds are those founded by investment
firms Fidelity Investments, Charles Schwab and Vanguard Group.
Grants to charities in 2013 were $9.66 billion, a record
high.
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