Donor-advised funds offer an option for contributing to charities without having to start a new charity or foundation. The donor can open a donor-advised fund at brokerage firms, mutual fund companies or community foundations. The Duluth-Superior Community Foundation is the premier local community foundation.
The donor gets a federal tax deduction only for the year the donor makes his/her contribution to the fund. The donor can allow the assets to grow in the account and direct all or part of the money to the donor’s favorite charities at any time.
The donor generally needs at least $5,000 to $10,000 to open an account, but he/she can make charitable grants of as little as $50.
The money is invested in mutual funds or investment pools until the donor chooses which charities to support. By giving an appreciated asset to a donor-advised fund, the donor can take a charitable deduction based on the value of the appreciated asset. If the donor sold the investment and wrote a check to the charity instead, the donor would pay capital gains tax on the amount of the appreciated value, and so the donor’s contribution would be less.