5 Situations When A Donor-Advised Fund Is A Great Choice

Posted on: 29 June 2021

Is now the time to set up a donor-advised fund? This charitable vehicle may sound like something that is reserved for people with much more money than you, but it can be a great solution for ordinary people in a variety of situations. What are some of these circumstances that may make a donor-advised fund the right move? Here are some to consider. 

1. You Had a Windfall

Did you inherit (or will you inherit) a large lump sum? Win the lottery? Make it big with your viral video? No matter where the windfall came from, you have a lot of decisions to make. One key decision is how and when to donate to charitable causes you care about. If you park some of that windfall into a donor-advised fund, you have set aside a specific amount for donating so you won't feel guilty or be hounded by people who want more money. 

2. You Have Cyclical Income

Is your income cyclical — up one year and down the next? Donor-advised funds even out your tax deductions by allowing you to take the tax benefits when and how you want. And yet the charitable causes you want to support aren't subject to the same schedule. You can set aside money when times are good and then distribute it to charities when they need it most. 

3. You Like to Spread Around Donations

Do you give to a number of different organizations? Can this get messy and disorganized? Or do you lose out on tax benefits because you don't keep track of all your giving? Make things less complicated by giving out of one single account and using it to track donations. Some may even, for a minimal fee, offer personalized services to do even more of the leg work for you. 

4. You Want to Grow the Donation Pool

A donor-advised fund can be invested any way you want, meaning you can grow the amount you put aside to donate. Fees are usually low, so there is little to prevent your money from getting a boost — resulting in more generosity without you working any harder. 

5. You Have Unusual Assets

Finally, a donor-advised fund can often hold assets that may be difficult to donate otherwise. For instance, many can work with cryptocurrency or hard assets like artwork or vehicles. If your designated charitable groups aren't up for the job of managing royalties or corporate interests, the fund company may be able to help you use these as a basis for donation. 

Do you fall into any of these categories? If so, a donor-advised fund could be a solution that works for you no matter how large or small your plans are. Learn more by consulting with a donor-advised fund provider today.