What is a Donor-Advised Fund?

What is a Donor-Advised Fund?

May 04, 2023

deduction in most cases. Remember to always speak with your tax professionals

What is a donor-advised fund? Paul L. Moffat, President and Senior Financial Planner at Arista Wealth Management, explains in the newest episode of Arista Advice!

Hello, welcome to Arista Advice. Question of the week is: "Paul, I just met with my I just met with my accountant and I need some tax deductions. Well, it's that time of year when many investors and clients are meeting with their tax professionals, and some of the meetings are pleasant and some of them are painful, and they're asking and looking for tax deductions.

One of the areas that you can look is a donor-advised fund. You say, "What's a donor-advised fund?" Well, let's talk about them. A donor-advised fund is where you take an appreciated asset - stocks, bonds, an office building, land, shares of a company that you've built, shares of an LLC that you can gift to a donor-advised fund and you can sell it. By transferring that asset to a donor-advised fund, you get a tax and your fiduciary financial planner before you do it, but as you make that donation of that appreciated asset, you get a tax deduction. That asset then goes into the donor-advised fund, and it's then sold. There's no tax consequence, only a tax deduction that you get for contributing to it, and then you can diversify that asset. 

As you'll see in this chart, a donor takes money, puts it into a cash or appreciated security. The donor-advised fund, we highly recommend Fidelity. It's the largest donor-advised fund in the country by leaps and bounds than the other donor-advised funds, but that money then goes into the donor-advised fund, and the donor or the owner and the client can still control the asset and make significant, systematized, scheduled contributions to the charities or organizations that mean the most to them. Always remember to speak with a tax professional and your fiduciary financial planner to have conversations about this important topic.

Please remember to go to AristaWealth.com to get other videos, tools,  tips, and resources to help you live a life of significance.