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Charitable Account
Also known as a donor advised fund, setting up a charitable account offers a simple, tax-efficient investment solution to your charitable donations. It is a kind of tax-advantaged charity brokerage account that provides a way for you to support the causes that mean the most to you today whilst providing a lasting legacy of generosity. Once you donate to the account, you are able to receive the same tax benefits that you would collect from donating to any public charity. Opening a charitable account is also generally easier and less expensive than establishing a private charitable foundation. Your donations to the account can be in the form of cash, stocks, or other assets. In return, you receive only one tax receipt even when the donations inside the account may be granted to multiple charities at a time.
Questions & Answers about Charitable Account
Grants can be made payable to any IRS approved charity. You are also able to choose whether you want to donate to more than one charity at a time while retaining control for which charity will receive what amount. Additionally, you can choose to set up automatic donations whereby recurring grants will be made each year to the charities of your choice.
In general, most accounts do not require the funds to be granted to a charity within a certain time limit. This allows you to let the investments inside the account grow before you distribute the money to charities. If your account doesn’t have any time constraints on donations, you could also use a charitable account as a legacy tool, allowing your children or beneficiaries to name the charities that the account will assign grants to.
You are allowed to transfer non-cash assets like that of stocks, mutual fund shares, bonds, and other publicly-traded assets. Accounts may also allow for the transfer of other non-cash assets such as real estate, private business interests, and restricted stock. Opening a charitable account has the added benefit of growing and eventually turning these assets into cash in a way that allows for a no-hassle tax-deduction. By contributing non-cash assets, you are generally able to avoid paying capital gains tax on the sale of the donated assets so long as they have been held for more than a year. This allows for a greater amount to go to charity compared to a scenario where you would sell the assets yourself and then donate the proceeds to your favorite charity.
Like any investment, the charitable account can lose money depending on market performances and the investments selected. However, any decreases in the account will have no effect on the tax deductions received for donating to the account.
Each of our advisors at Florida Financial are knowledgeable on charitable accounts and can help guide you to make sure it is the right choice for you. Contact us today for a free consultation.
Note: FFA does not provide legal advice.
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