What is a Donor-Advised Fund and Why Should You Care?
The end of the year is fast approaching and for small businesses, year-end tax planning is critical! In addition to a careful review of our business’s financial health, we try our best to be deliberate in our approach to making charitable contributions!
A Donor-Advised Fund (DAF) is an account through which an individual or a company can support charitable organizations they care about. DAFs are flexible, so you don’t have to worry about converting your donations to cash; simply contribute to your fund in the form of cash or assets. Your donations will grow tax-free based on a variety of investment options that you can choose from, and then you can make grants to the charity of your choice whenever you’re ready.
There are several Donor-Advised options out there, but we recommend we recommend using the National Christian Foundation (NCF), which describes their “Giving Fund” as an “Easy-to-create, low-cost, flexible account for charitable giving that is a popular alternative to giving directly to charities or creating a private foundation.” Saving a few bucks while giving is always welcome, right?
Our Top 5 Reasons to use Donor-Advised Funds –
Your reasons may differ, but here’s why we used DAFs –
1. We are Called to a Lifestyle of True Generosity
We believe that we are called to a lifestyle of true generosity. Admittedly, this is much easier said than done, but we try to embrace the call to living charitably out of faith. According to Scripture, we are to love the Lord with all our heart, soul, mind, and strength, and love our neighbor as ourselves (Matthew 22:37); we aim to fulfill this call through giving and serving with a generous heart.
2. Money Leads, Hearts Follow
We believe that our focus is drawn to the things we invest in. As Randy Alcorn says in The Treasure Principle, “money leads, hearts follow,” which draws from Matthew 6:19-21. Giving doesn’t always come easy, but we encourage everyone to start where they are and grow into the life of giving. We want to be focused on the right things that create a lasting impact. It’s im
3. Convenience and Simplicity
We like DAFs for their convenience and simplicity. Giving is the priority, but we also understand the need to be as efficient as possible with administrative activities. DAFs help to minimize time spent actively managing your giving efforts. We assume that most DAFs are similar to NCF, providing a system to manage your investments and giving all on a simple online platform and from any device. If you are looking to give without spending unnecessary time on administration, DAFs are your best bet.
4. Multiply Your Impact
Giving through DAFs allows you to multiply your impact. You’ll have the opportunity to choose an investment option that ranges from conservative to aggressive, based on your risk/return profile. This way, you can grow your money tax-free and then recommend grants to various charities whenever you’re ready to do so.
5. Immediate Tax Deduction
We believe that part of quality stewardship is being wise with both your investments as well as your tax strategies. No one ever said you can’t save while giving! Contributing money into your fund qualifies for an immediate tax deduction, but you’ll still have the flexibility of making a grant to the charity of your choice at a later date.
Are you interested in Donor-Advised Funds and looking to start one for yourself? If so, we would be thrilled to put you in contact with a Relationship Manager at NCF to figure out what works best for you and your business. Giving is rewarding, especially when done conveniently. Once the hassle is taken out of donating, you’ll likely feel more motivated to donate on a regular basis and hopefully make a profound change through generosity.
“Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.”