Donor-Advised Funds

A donor-advised fund comes into existence only when a person irrevocably transfers assets to a charity. Thus, if a person has established a donor-advised fund, the question is not whether the money will be used for charitable purposes but rather by which charities and for what purposes.

Typically, the donor will serve as advisor and periodically recommend to the charity hosting the donor-advised fund that grants of certain amounts be made to specified charities. These written instructions are not beneficiary forms, but they are the equivalent because the donor/advisor is directing the gift. Quite often, the donor will name one or more successor advisors — children, for instance — to continue to make recommendations following the donor’s death. There is, in fact, considerable flexibility as to what the designated advisor can do with a donor-advised fund.

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