Donor-Advised Fund

Donor-advised funds (DAFs) are accounts that are held at a public charity on behalf of a donor. The donor contributes cash or other assets to his or her DAF and is able to take a tax deduction, up to allowed maximums, in the year of the donation. The donor can advise the charity on grants to be made to qualified charitable organizations using these funds provided the purpose meets the DAF guidelines. The funds in a DAF can also be invested to grow tax-free and donors can continue to make charitable contributions to their DAF until the account is closed.

Upon the death of a donor-advisor(s), control of the remaining funds can be dealt with in one of two ways. If a successor or charitable organization has been designated, that individual or organization can continue recommending grants, in the same way that the founding donor did. If no successor is named, the remaining funds become part of the Bank of America Charitable Gift Fund’s (CGF’s) General Fund which supports a variety of charitable causes and organizations at the CGF’s discretion.

The Charitable Gift Fund can accept contributions from Individual Retirement Accounts.  Please note, however, if the donor is making a current lifetime distribution, i.e. not at death, distributions from an IRA to the donor advised fund do not constitute   “qualified charitable distributions” excludable from the donor’s income. This is because federal law specifically excludes donor advised funds (as well as certain other public charities) from being eligible to receive qualifying charitable distributions. Rather, such IRA distribution would be includible in the donor’s taxable income and then the donor would need to file for an offsetting charitable deduction. As such, donors should consult their tax and legal advisors to determine whether to proceed in light of their overall tax situation.

There is no limit to the amount of cash or other assets that can be contributed to a donor-advised fund (DAF). There are limits to the tax deductibility of gifts to a DAF, generally offering up to a maximum potential deductibility of 60% of the donor’s current year adjusted gross income. Donors should consult their legal and/or tax advisors before making any gifting decisions.

Once cash or other assets are gifted to a donor-advised fund, they become the property of the public charity that manages the DAF on the donor’s behalf. As a result, these assets and any subsequent interest payments, dividends or capital appreciation are the property of the charitable organization and not taxable to the donor. Investors should consult their legal and/or tax advisors before making any gifting decisions.