Because of the new tax law, many people may find it more useful to use the new standard deduction ($12,000 for individuals and $24,000 for couples) and not itemize their deductions as they have done in the past. Some people, however, may want to itemize their deductions, but aren’t sure whether they will have enough to exceed the above thresholds. These people may want to consider establishing a Donor Advised Fund (“DAF”).
A DAF is a separately administered fund established by a donor(s) via a tax-deductible gift of at least $10,000 to the Virginia United Methodist Foundation. The balance can’t fall below $2,000 for more than a year and the minimum distribution is $500. A receipt is issued and the donors may include the entire gift among their itemized deductions for the current year.
Once established, the donors advise the Foundation to make contributions from their DAF to other charitable causes, such as their church. At least 50% of the contributions must go to Virginia United Methodist churches or institutions. Contributions may also be directed to other 501.c.3 organizations such as colleges, the Red Cross, the Virginia Repertory Theatre, etc. While the Foundation has the authority to veto a proposed contribution, virtually all charitable organizations will be considered.
These contributions do not have to be made in the year of the initial gift or the subsequent year. They may be spread out over multiple years. However, because the donor was able to deduct the entire initial gift establishing the DAF during the year in which it was established, they may not take subsequent deductions when gifts are made from the DAF.
The DAF may be invested in one of the Foundation’s 4 funds – Stock, Bond, Balanced or Balanced Plus. This provides the opportunity for the fund to increase in value prior to distributions. A management fee (currently 1.29% annually) is charged for the administration of the fund.
For more information or if you are interested in establishing a DAF, please feel free to contact Ted Soto at 804-521-1122 or Tommy Herndon at 804-521-1157.