As year-end tax planning and charitable giving activity swing into high gear, advisors may want to take a look at donor-advised funds. These funds allow an individual to make donations to an IRS-approved 501(c)3 charitable organization in a simple, tax-advantaged way.
The donor-advised fund offers two advantages over direct charitable donations. First, it allows the giver to donate an asset with unrealized gains without liquidating it. Second, it allows the giver to get a charitable tax deduction credit for up to the asset's full market value. In addition, donor-advised funds offer the giver the ability to advise the sponsor of the fund on how the proceeds from the transferred asset should be invested and the timing of payouts to chosen charities.
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