The IRS recently indicated that it would approve of charitable giving programs where the donor still manages the donated assets, subject to certain conditions and restrictions. As you have made charitable contributions in the past, you may wish to investigate using a donor-managed account as part of your charitable giving activities.
A donor-managed account is typically implemented in association with a money management firm. Unlike donor advised funds, the donor-managed accounts allow you to follow your own preferred investment strategies choosing from many investments including equities, fixed income, mutual funds, and alternative investments. This type of program would be appropriate for you if you:
- are prepared to give at least $250,000, although lesser amounts may be contributed;
- understand financial management and have a substantial investment record;
- want greater freedom in the types of investments you can make; and
- want to support one organization with your gift.
Under a donor-managed charitable giving program, you will still receive a charitable contribution deduction based on the amount of your initial donation. You may not take a deduction for any additional growth of the assets. If the amount of your charitable contribution deduction is more important to you than managing your donation, you may wish to grow your assets before making the donation.
A note of caution: A contribution to a sponsoring organization for maintenance in a donor advised fund is not deductible for income tax purposes if the sponsoring organization is a veterans organization, a fraternal society, or a cemetery company. In addition, no deduction will be allowed for such contributions if the supporting organization is a so-called Type III supporting organization.
In addition to satisfying the usual substantiation requirements, a donor must obtain, with respect to each charitable contribution to a donor advised fund, a contemporaneous written acknowledgment from the sponsoring organization providing that the sponsoring organization has exclusive legal control over the assets contributed.
If you have any questions about this charitable giving program, or if you have any other questions about charitable giving, please contact our office at 847-240-1040 at your convenience.