Donor-advised funds allow you to give immediately and strategically after a natural disaster
For many people, when disaster strikes, their first impulse is to ask “How can I help?” And with the number of natural catastrophes tripling worldwide since 19801, there has been no shortage of opportunities to lend a hand in times of crisis.
But what if there were a smarter way to give? What if you were able to fold your charitable giving into your broader wealth management plans – in a way that let you give both strategically and as the need arises?
Strategic Giving Through Donor-Advised Funds
Essentially, a donor-advised fund is an investment account you create solely for supporting charitable causes – and because the fund is self-directed, you get to dictate where, when and how much to give.
You open the fund by making an initial donation of cash, stocks, bonds or other select assets.
A nonprofit sponsoring organization invests the assets and manages the fund.
You instruct the sponsoring organization to disperse funds to the charities of your choosing, at your discretion.
By funneling your charitable giving through a donor-advised fund, you and your target organization can reap important benefits:
Immediacy. Because the funds are already set aside, donor-advised funds let you donate immediately. You don’t have to reconfigure your existing financial plans to give.
Effectiveness. One of the biggest challenges to financing recovery efforts after a natural disaster is timing: Often it takes years to recover from a catastrophe, but as media attention moves on to the next news story, donations can dry up within as few as six weeks. By scheduling a recurring gift through a donor-advised fund, you can help immediately as the crisis is happening but also during the stabilization, rebuilding and prevention phases.
Tax optimization. Donor-advised funds let you help yourself as you help others. Not only do the funds’ investments grow tax-free, but your initial and any future contributions to the fund are deducted from that year’s taxes – a useful benefit if you plan on bunching deductions as part of your tax strategy.
With the frequency and intensity of natural disasters continuing to increase, getting the most bang for your charitable buck is critical. With donor-advised funds, you can give for both the short and long term in a way that fits into your own plans.
To discuss how donor-advised funds could impact your broader wealth management plans, contact your Baird Financial Advisor. Not a Baird client? Find a Baird Financial Advisor.
1The Conference Board Inc., The Future of Disaster Philanthropy, 2017.