Donor-advised funds, which allow investors to deposit assets for an upfront tax deduction and then make donations to charities of their choice, are becoming a popular option for investors, according to Fortune.The funds start out like a typical investment account. An investor deposits cash, securities, or in some cases, real estate in a fund that invests in stocks and bonds. The minimum is usually $10,000.
Then an investor takes an immediate tax deduction and makes grants to their favorite charity whenever they want. The rest of the money continues to grow (or diminish) and investors can name the account anything they wish.
The growth in these types of funds have been impressive, and new accounts hit a record high last year. The funds distributed $3.3 billion to charity last year and assets in donor-advised funds currently top $17 billion, up 15.5 % from last year, according to the National Philanthropic Trust.
The booming stock market has been driving the force. “There’s a direct correlation,” said David Giunta, president of the Fidelity Charitable Gift Fund, citing appreciated stock as the most popular way to open an account.
Large fund companies such as Fidelity, Vanguard, and Charles Schwab have such funds, and the competition is increasing. Recently, Fidelity lowered its fees across the board, from 1 % to .06 % of total assets for most accounts and halved its account minimum to $5,000.
Also, donor-advised-funds are offered through universities, community trusts and relief organizations, though they tend to charge higher fees.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.