What is a donor advised fund?
A donor advised fund is a vehicle that allows individuals, families and businesses to simplify and streamline their charitable giving. By establishing a tax-deductible donor advised endowment fund with the NCCF, you can centralize all your charitable giving through one cost-effective and expertly managed fund. Charitable giving is made easy, convenient, flexible and rewarding.
Value and benefits
Flexible giving: A donor advised endowment fund is the perfect vehicle to address both your immediate charitable interests and also your future charitable goals, especially if these may change over the years. With this type of fund, you’re not tied down to any one charitable organization or giving pattern.
Create a legacy: Grants from your fund are always made in the name of your fund, unless you choose anonymity. Many fund-holders choose to involve family members in grant-making considerations, an approach that promotes the spirit of philanthropy in future generations. Successor advisors may also be named to advise the fund, continuing the tradition of giving through the years.
Community impact: Businesses looking for a way to give back to the community can establish a donor advised fund and appoint an employee committee to research and recommend charitable grants. In addition, Foundation staff can serve as your charitable giving resource, providing expertise and due diligence to help you make wise grant recommendations and leverage the impact of your gifts.
Tax deductibility: A donor advised fund allows you to contribute to the fund, receive a tax deduction during the donation year and consider grants from the fund immediately or over time. Donor advised funds operate much like a private foundation – without the start-up and ongoing administrative expenses and tax-reporting requirements. In addition, a donor advised fund offers better tax deductibility for gifts. (Please refer to the NCCF’s comparison chart.)
Accountability: You will receive quarterly fund statements, which report all activity, including the fund balance, grants made, additional gifts received, investment returns and administrative fees.
Administrative ease and cost-effectiveness: Donor advised funds typically have lower operational costs than private foundations. The NCCF provides fund maintenance, grant-making assistance and due diligence, record-keeping, investment oversight and tax reporting to the IRS ─ all for a simple low fee. There are no start-up charges to begin a donor advised fund.
Professional services: A fund established with the NCCF is subject to our investment policies and will be administered expertly by professional investment managers selected by the Foundation’s Finance Committee. Funds, which have access to greater diversification, are pooled for investment purposes and are generally charged lower fees than if they were invested separately. All of this contributes to maximizing earning potential.
Choices -- Your donor advised fund may take either of the following forms:
Endowed: Endowments are permanent funds established to carry out the donor's philanthropic intentions in perpetuity. In essence, endowments are gifts that keep growing and giving. Assets are invested for growth, and the amount available for grants each year is based on a “spending rule” that currently distributes a maximum of 5% of the Fund’s market value annually, based on an average fund balance over 12 quarters.
Expendable: Expendable funds are not invested, but are held in liquid accounts that permit grant distributions in any amount at any time. ($5,000 initial balance and $1,000 retained balance required.)
- Contact Foundation staff to customize a donor-advised fund for yourself, your family or your business.
- Name the fund whatever you choose (after yourself, your family, your business or a loved one; you may also choose to ensure anonymity).
- Make an initial contribution (minimum $25,000; additional gifts may be added at any time, in any amount).
- Your gift is invested.
- Grantmaking begins (the NCCF currently recommends an annual distribution of 4% of the fund’s average balance).
- There are no start-up fees; an administrative fee of the fund’s balance is charged annually.