Building a Family Legacy of Giving Through Donor-Advised Funds

At the Community FoodBank of New Jersey, we see the incredible impact of philanthropy every day. It’s amazing how a single act of giving can change lives, and when families come together to create a legacy of giving, the impact can be truly transformative. If you’re considering how you can make a lasting difference while also getting your family involved in meaningful ways, Donor-advised funds (DAFs) are excellent tools. In this article, we’ll dive into how donor-advised funds can help you build a lasting family legacy of giving, their benefits, and practical steps to get started.

What is a Donor Advised Fund?

Donor-advised funds (DAFs) are charitable giving accounts that allow you to contribute assets and enjoy immediate tax benefits. You can donate cash, stocks, or other assets and also decide which charities to support and when. This flexibility is perfect for families looking to make a significant impact over a period of time. According to the IRS, a donor-advised fund allows you to make a charitable contribution and receive a tax deduction in the year you contribute, even if the funds are distributed to charities later. 

It is easiest to think of a donor-advised fund as a way to set up a charitable fund that grows and evolves with your family. It’s not about giving once but creating a strategy for continuous involvement. This means you can donate assets now and make grants to your favorite causes any time you choose. This approach ensures that your charitable efforts align with your family’s values and goals, providing immediate benefits and long-term impact.

Engaging Your Whole Family in Philanthropy

One of the most rewarding features of a donor-advised fund is how it can bring your family together. Establishing a donor-advised fund allows everyone to get involved in the giving process, from setting up the fund to deciding which causes to support. This involvement can deepen family bonds and create a shared sense of purpose.

Example Scenario

Let’s say your family decides to focus on issues like hunger relief and education. You can start by setting up a DAF and then schedule annual family meetings to review the fund’s performance and brainstorm which charities to support. Family members can share their thoughts and research on different organizations during these meetings. This collaboration helps everyone feel connected to the charitable process and ensures that your giving reflects your family’s values.

Family Involvement Tips

• Hold Regular Family Meetings: These meetings can be used to discuss the impact of your giving and make decisions together. This could be an annual tradition where you review how the fund has been used and plan for future grants.
• Assign Research Tasks: Encourage family members, especially younger ones, to research and present on different causes or organizations. This can be a great learning experience and helps everyone stay informed about the impact of their contributions.
• Share the Experience: Make giving a family event by involving everyone in selecting charities to support. Whether through volunteer work or attending charity events, sharing these experiences can strengthen your family’s commitment to philanthropy.

The Benefits of Building a Philanthropic Legacy

Creating a family legacy through a DAF is about more than just financial contributions; it’s about instilling values and ensuring that your family’s charitable efforts have a lasting impact. Here’s how a donor-advised fund can benefit your family.

Instilling Values

When you involve your family in charitable giving, you teach them important values like compassion, responsibility, and community engagement. This hands-on approach helps shape the next generation into thoughtful and active philanthropists. The National Philanthropic Trust highlights how engaging younger generations in philanthropy fosters a sense of responsibility and a desire to make a positive impact. 

Maximizing Tax Benefits With Donor-Advised Funds Tax Deductions

Donor-advised funds offer immediate tax deductions on contributions, which can be particularly beneficial for families looking to optimize their tax strategies. You can receive a tax deduction in the year you make the contribution, even if the funds are granted to charities later. This flexibility allows you to maximize your tax benefits while planning charitable giving. 

Flexibility and Growth

Another advantage of donor-advised funds is investing in your contributions and watching them grow. This means that your charitable capital can increase over time, allowing for even greater support for the causes you care about. Donor-advised funds provide flexibility in managing and growing your philanthropic assets, which can lead to more significant contributions in the future.

Sustaining Impact

Donor-advised funds enable you to plan your giving strategically, ensuring that your charitable efforts have a lasting impact. You can make grants over many years that support both immediate needs and long-term goals. This strategic approach allows you to address pressing issues while also investing in future opportunities.

Getting Started with Your Family’s Donor-Advised Fund

Starting a donor-advised fund is a straightforward process that can set the stage for a meaningful philanthropic journey. Here’s a step-by-step guide to getting started:

Step 1: Choose a Donor-Advised Fund Sponsor

The first step is to select a reputable donor-advised fund sponsor that aligns with your family’s charitable goals. This could be a community foundation or a financial institution offering donor-advised fund services. GuideStar is a valuable resource for researching potential sponsors and finding one that fits your needs.

Step 2: Engage Your Family

Introduce your family to the donor-advised fund and start discussing how you can use it to support causes you care about. Set up regular meetings to review the fund, discuss potential grants, and involve everyone in the decision-making process. This collaborative approach ensures that your family’s giving is impactful and meaningful.

Step 3: Make Your Initial Contribution

Once you’ve chosen a sponsor and consulted your family, you can contribute assets to your donor-advised fund. This could include cash, stocks, or other investments. The DAF contribution is tax-deductible in the year it’s made, providing immediate tax benefits. This step sets the foundation for your family’s charitable fund.

Step 4: Start Grantmaking

With the fund established and your family engaged, you can begin recommending grants to charities. As your family becomes more involved, you’ll find new ways to make a difference and strengthen your philanthropic legacy. This ongoing process allows you to adapt your giving to changing needs and opportunities.

Conclusion

Building a family legacy of giving through donor-advised funds is a powerful way to make a lasting impact while involving your loved ones in meaningful philanthropy. At the Community FoodBank of New Jersey, we see the difference that collective giving can make in addressing food insecurity and supporting the community. By starting a donor-advised fund, you can ensure that your family’s charitable efforts continue to grow and benefit those in need for years.

Ready to take the first step in your family’s charitable journey? Donate now and explore how a donor-advised fund can support your philanthropic goals.