Donor Advised Fund Q&A
Did you know? So much good is being done by so many people. But can anyone add it up? Can anyone report that the Iranian-American community has done so much this year. No, except for a few well publicized endowments much of the good deeds are going unnoticed. Not just by our own community, but by the larger American public. Knowing the magnitude of good creates a sense of unity and encourages more philanthropy. It goes without saying that letting people outside the community know goes far in portraying a more accurate picture of our contributions. And a Donor Advised Fund (DAF) is a perfect way to do so.
What is a DAF? Think of PARSA Community Foundation as a philanthropic bank and your DAF as your philanthropic checking account at that bank. Just like a bank you receive quarterly statements with the balance and donations made.
How does it work? 1) You fund it. 2) You take your deduction once on your tax form. Then don’t need to deal with tax deductions from any grant you recommend from the account. 3) You advise PARSA CF of donations you would like us to make to charities at your convenience. 4) You can replenish your DAF at any time. We do the rest of the work for you.
In whose name will donations be made? PARSA CF will send the donations in the name of your fund (your fund’s name will be noted on memo of check unless you request anonymity).
Can my DAF be anonymous? If you choose, you can set up an anonymous account or make anonymous donations. Even if you make anonymous donations, they will be added to the community report card. Your information is protected with the same level of seriousness as a bank.
How do I get started? It's as simple as:
1) Pick a name (it can be whatever you want, your kids names, your pet, or your favorite vacation spot)
2) Fill out the agreement (it should take less than 10 minutes)
3) Fund the account by sending a check or wire transfer.
Why start a DAF at PARSA CF instead of with other financial service? Through a DAF at PARSA CF our community can have a quantitative and reliable number that we can report of the annual contributions of our community. Our community benefits in addition to the charities of your choice.
What is the community report card? PARSA CF aggregates and publicizes the breadth and depth of Iranian charitable giving. Our goal is to grow the amount every year – our inspiration is the Jewish Community Foundation of Los Angeles which gave $78m in funds in 2007.
How is my DAF invested and what returns will I earn on it? It is invested in a no risk Money Market account and will receive the account’s rate of return.
By when do I need to spend down the funds in my DAF? DAFs do not expire. You can put the money in this year but don’t need to give it away in the same year.
Are there limits to the grants I can recommend with my DAF? Our DAFs have supported Universities, relief organizations, children’s schools’, whether you are giving to a Persian cause or not, your DAF is your vehicle for charitable giving. You can make an unlimited number of grants from your DAF to registered charitable entities.
When is the good time to set up a DAF? If you are planning to give anything in this or next year then now is a good time, but you should particularly consider giving in a year when you have a large adjusted income. You can get the maximum amount of deduction as with any other taxable event. If you are thinking of setting up a family legacy, it is also a good time to consider opening a DAF.
I am thinking of selling appreciated assets, can I transfer them to a DAF to avoid capital gains taxes? Yes, you can avoid capital gains taxes and receive an immediate fair-market-value tax deduction by transferring such assets or limited partnership interests to a Donor Advised Fund, while supporting the causes you care about. However, PARSA CF should be included in your planning before the sale is initiated.
I am thinking of starting my own foundation, should I consider a DAF instead? A DAF at PARSA CF is a cost-effective and convenient alternative, without the limitations, expenses and administrative responsibilities associated with a private foundation. You get the same tax benefits, we do all the work and send the checks in your name. A DAF can be named for your family, and grants issued from that fund will carry your family's name. Once it's established, anyone can make tax-deductible contributions to your fund at any time, in any amount.
What are the benefits of a setting up a donor advised fund?
- An immediate charitable tax deduction for the full fair market value of the assets you transfer
- Simplified charitable contribution accounting and administration
- Maximum tax advantage
- The fund can be named according to the donor’s choice
- Elimination of all capital gains taxes on donations of appreciated assets
- Ability to recommend distributions to multiple charities of your choice
- Ability to pass on the right to recommend distributions from your fund to your children
- It’s a gift that keeps on growing – your DAF will gain interest while held at PARSA CF