above: Sara DeRose
The giving can seem endless at this time of year. You donate food to your local soup kitchen in the spirit of Thanksgiving. Your mate tosses a bigger bill into the basket at your place of worship. Your alma mater asks for help funding the new science complex. The nature center membership needs to be renewed. The dog rescuers could use your help. The PTA, the rainforest, the homeless coalition, another cancer walk. A check here. A pledge there.
They’re all worthy causes. But are they the most meaningful to you and your family here in Fairfield County?
If haphazard giving is leading you to ask yourself that question, you’re not alone. “There’s an interest in engaging your family and in creating a mission statement as a family—that is a trend we’re seeing more and more of,” says Sara DeRose, a director and philanthropic adviser at Fairfield County’s Community Foundation, in Norwalk. “Donors are looking to be more educated. They’re thinking through issue areas they’re most passionate about and looking at how they can make the most impact over time with their charitable giving.”
Increasingly, families, individuals and companies are turning to donor-advised funds to make their philanthropy as strategic and informed as their investing. DAFs are essentially charitable checking accounts, managed by a sponsor organization such as a community foundation or the charitable arm of financial service com like Vanguard or Fidelity. Contributions to a donor-advised fund are tax-deductible. Money invested inside a DAF grows tax-free and donations are made at the donor’s direction.
“Donor-advised funds have risen in popularity over the last 10 years or so as deep wealth in this country has increased,” DeRose says. “They simplify your giving and you get a philanthropic adviser as your personal guide.”
Advisers can help families come up with a mission statement, and handle all administrative tasks and records. At Fairfield County’s Community Foundation, advisers suggest vetted organizations that align with a family’s mission and can best use the family’s gifts. With the foundation’s “brokered grants” program, DAF-contributors can partner with other donors to fund specific issues that local organizations address.
While a desire to help others is the main reason to establish a DAF, these funds can help lighten your tax load, especially when appreciated assets are involved. For example, if you bought $10,000 worth of Amazon stock 10 years ago, and you’re now sitting on a pile worth more than $75,000, instead of selling the stock, paying taxes on the capital gains, then donating the leftovers, you can donate the appreciated stock, get a much bigger tax deduction, and send a much bigger gift to charity.
“You give and get immediate benefits, and make grants at your leisure,” DeRose says. “More and more families are interested in this. They know they want their children to get involved as soon as they’re old enough to understand that you spend some, you save some, you give a portion away. And that is foundational to how they raise their family.”
SHARING THE WEALTH
For years, the heads of generous families in Fairfield County and beyond have established private, family foundations to carry on the giving long after the founders pass on. But what happens when subsequent generations don’t share the founders’ mission or the time, money or energy to manage the foundation? Squabbling can lead to a long, legal, expensive dissolution. Conversions from a private foundation to one or more donor-advised funds can be an attractive, less expensive alternative. “We work with a number of families that had a family foundation, and now family members can’t agree on funding priorities,” says DeRose. “This is happening increasingly as you see transfers of wealth and ideological differences. Donor-advised funds can be a really good solution.”