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Charitable giving in tough times

February 21, 2009|By BRAD SELL

These tough economic times are proving to us here at the Community Foundation of Washington County MD that donor-advised funds work just as we said they would.

First of all, what is a donor-advised fund (DAF)? A DAF is a fund established at the Community Foundation by an individual, a family or a business, which can be either endowed or non-endowed, and from which the donor recommends distributions to nonprofit organizations.

If the fund is endowed, then it is subject to the foundation's 5 percent distribution guideline and distributions are only made once a year.

But if it is nonendowed, distributions can be recommended at any time and the entire balance of the fund can be distributed.

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The foundation recommends that DAF's be created when times are good and appreciated assets are readily available. This allows the donor to take maximum advantage of the tax considerations in making their contribution.

For example, if one has appreciated stock and he or she donates the stock to the foundation, they may be able to save on the capital gains tax and also deduct the full, fair-market value of the stock from their income tax. (Please consult your tax advisor).

If a donor uses the good years to build up assets in their fund, when the bad years roll around (such as now!), they will have funds available to continue to make contributions to the charities of their choice. How does that translate into the real world? Consider this:

o Of the 165 funds at the foundation, 23 (14 percent) are donor-advised

o Of the $840,000 that the foundation distributed in grants for FY 2008, 61.1 percent or $513,000 came from donor-advised funds.

o In the first six months of this fiscal year, those same donor-advised funds have already distributed $399,248 to a very needy nonprofit community

With a donor-advised fund at the Community Foundation, donors have the capacity to build up resources and be in a position to continue to be charitable at a time when the need is greatest.

For further information on donor-advised funds or other types of funds at the Community Foundation, please give me a call at 301-745-5210.

Bradley N. Sell is the executive director of the Community Foundation of Washington County MD.

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