Donor-advised funds: What they are and how they work

If you are interested in making charitable donations then donor-advised funds could be a great solution. Charitable giving is high on the list of priorities for many individuals, but figuring out the best way to accomplish this can be a challenge at times. Donor-advised funds can often simplify the giving process while at the same time providing substantial income-tax benefits. Individuals can open these accounts at many through many custodians and then fund them with cash, marketable securities, and even other assets such as interest in a private business.
The fastest way to give to a charity is to write a check, but cash isn’t always the most effective asset to donate to your chosen organization. If you choose to donate highly appreciated stocks to charity through a donor-advised fund you can give them assets of equal or greater value to the cash you intended to donate while also saving substantially on the capital gains taxes that would come from selling these assets and then donating the cash.


After a donor-advised fund is funded the individual making the donation receives an immediate income-tax benefit. The fund then disburses money to charities and organizations the donor designates. Another benefit of these special funds it that any undispersed funds can continue to grow cash free. Donor-advised funds can provide substantial tax benefits to the individual donating and allow them to maximize their giving to charities over time.


Donor-advised funds are not a catch all solution for those looking to give to charity but for individuals and families who are looking to do substantial charitable giving they can be a great way to complete this and leave a legacy that can stretch for multiple generations. Their ability to hold marketable securities that will grow for many years while they are disbursed over time can be a way for individuals to continue to show their heirs the organizations and causes they were passionate about. If charitable giving is a priority for you we would love to chat with you about what strategies you can implement to best accomplish these goals.

All the best,

Your Fortis Capital Management Team