Donor Advised Funds

Donor Advised Funds


 

Donor Advised Funds (DAF), offered by many companies, charitable organizations, and investment-type firms, enable donors to contribute cash or other assets now, receive an immediate income tax deduction, and direct the actual charitable gifts to be made either currently or at some point in the future. The DAF is often a simpler, more cost-effective, and efficient alternative to a private foundation while providing important support to selected charitable groups.

When a contribution is made to a DAF, the donor gives complete control over the donated funds to the sponsoring organization and receives a current income tax deduction for the full amount of the contribution to the extent allowed by law. For DAFs funded with appreciated stock, the donor also avoids all capital gain tax that would have been due upon the outright sale of the securities. Even though a DAF is not required to make minimum charitable distributions of income or principal in a given year, you, as the donor, may still claim a tax deduction to the extent allowed by law. You may make subsequent donations of cash or securities at any time and benefit from additional tax savings. A unique aspect of the DAF is that you can make non-binding recommendations to the sponsoring organization regarding the investment policy and DAF distributions in order to fulfill your philanthropic goals in a flexible, tax-favored, and cost-effective way. In addition, there are no required board meetings, and family members may succeed the original donor in directing grants. The donor advised fund does not incur any taxes, and no special tax reports must be prepared or filed.

Hillsdale as the Sponsoring Organization — If you select Hillsdale as the sponsoring organization for a DAF, our minimum investment is $25,000 in cash or stock with a one percent annual fee. You and your family may recommend other charities to receive distributions, although we request that no more than ten organizations be selected with Hillsdale designated as at least a twenty-five percent beneficiary of the projected five percent total distribution. Hillsdale also needs to approve any other charities selected to avoid conflict with the College’s stated mission. The College would advise you of the amount available for annual distribution and would mail the funds to your recommended charitable organizations. To meet grant requests, the College would invest your DAF in accordance with the endowment policy set forth by the Hillsdale Board of Trustees’ Investment Committee, which believes in a broad diversification of assets across a number of different asset classes in order to focus on providing long-term growth in excess of inflation, and preserving and growing the “real” spending power after the negative effects of inflation. This includes liquid mutual funds, exchange traded funds, and cash invested in a mix similar to the mix utilized in long-term endowment portfolios. You would receive detailed annual reports on your DAF’s fair market value and a summary of the distributions made to you selected charitable organizations.

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