Donor-advised funds, which have steadily grown in popularity in recent years, provide donors with the immediate tax (and tax planning) benefits of an irrevocable gift while also affording the time to decide which public charities they would like to support through grants recommended from the donor-advised account. Donor-advised accounts are offered by hundreds of community foundations, educational institutions, and other public charities. In addition, a number of national financial services companies have created independent charitable organizations that offer donor-advised accounts. Although not endorsed by attorney Fleisher, the
Vanguard Charitable Endowment Program is a well run independent organization, which has very low administrative fees.
Similar to private foundations (but without much of the regulatory and financial hassle), donor-advised funds generally accept donations of cash, appreciated securities, and even special assets such as restricted stock. In some cases, donor-advised funds accept cash gifts from third-party intermediaries that directly accept and process other types of gifts, such as real estate, from donors.
After the donor contribution, this charitable-giving vehicle establishes a donor-advised account and invests the proceeds in pools of specified investments, often including mutual funds. At that point, the donor assumes the role of the account advisor, but someone else can be nominated by the donor to serve as an account advisor. The donor receives periodic statements reporting the account's current market value, any new contributions to the account, and any grants paid from it.
As the account advisor, the donor no longer owns the account assets from the gift, but the donor can suggest (advise) exchanges among investment pools and recommend specific grants. Before approving the recommendation, the donor-advised fund must ensure that the recipient of the grant is a qualified organization, and that the grant will not benefit the donor, account advisor, his or her relatives, or any specific individual. Upon approval, the donor-advised fund sends the grant to the charity with a letter specifying the grant's purpose and attributing the grant recommendation to the donor's named account (unless anonymity is requested).