In 2019, Americans gave an estimated 449 billion dollars to charity.* This is not just a one-time spike in giving, but a 5.1% increase from 2018.* America is an extremely generous nation with people who are committed to seeing their communities, country, and world improved by non-profit causes. If giving is important to you, there is a financial strategy you should know about.
A Donor-Advised Fund is an account that allows you to make charitable contributions without giving to a charity immediately. Contributions are tax-deductible for the current year but can deployed to any qualifying charity whenever you want. This may be particularly useful if you want to “pre-fund” your charitable giving.
For example, if you anticipate your income to be higher this year than next and you plan on giving to charity next year, it may be advantageous to bunch your gifts for both years into the year your tax liability will be greater. This will help reduce your taxes while accomplishing your philanthropic goals. Also, contributions left inside the Donor Advised Fund can be invested. Companies like Vanguard and Fidelity have made it simple for you to setup an account, contribute, invest, and distribute funds. Be sure to evaluate the fees and invest risks associated with these accounts. If you are interested in learning more about how this strategy could benefit you, contact our team at Legacy today.
*Giving USA 2020
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