Donor-advised funds are a convenient and flexible way to fulfill your charitable giving goals

Learn how donor-advised funds like the Edward Jones Charitable Gift Fund can help you support the causes you care about while potentially receiving tax deductions for your contributions.
A donor-advised fund, or DAF, is a vehicle for charitable giving that lets you make an irrevocable contribution to the fund, for which you receive an immediate tax deduction.
It is operated by a sponsor or sponsoring organization that invests and manages the donated assets.
DAFs have grown in popularity amid heightened interest in charitable giving. A recent report from the Giving USA Foundation reported that charitable giving in the United States reached a record $471 billion in 2020.
The minimum initial contribution to the Edward Jones Charitable Gift Fund (PDF) is $10,000. As a donor, when you contribute cash or securities to a DAF, you’ll receive an immediate tax deduction. The assets you contribute grow tax-free.
Donors can contribute to the fund as often as they like and request that distributions be made to IRS-approved public charities of their choosing.
The Edward Jones DAF is called the Edward Jones Charitable Gift Fund (PDF). Investing in DAFs typically follows the three-step progression summarized below:
Source: Edward Jones
The purpose of this chart is to explain the donor-advised fund process. In the first step, a donor makes a contribution of cash or marketable securities to the Edward Jones Charitable Gift Fund. The money is invested based on your preferences, and any investment growth is tax-free. The donor recommends grants/distribution to charities you wish to support, when to support them and the amount you wish to give.
The main advantages of DAFs are that they offer a simple and convenient way to maximize charitable giving while receiving an upfront tax deduction.
Several other potential DAF tax-related benefits are worth noting:
This is an example of the difference between giving a stock to a DAF versus selling it for cash and how each affects capital gains tax and/or amount given to charity.
If you give the stock to a DAF | If you sell the stock for cash | |
---|---|---|
Capital gains tax1 | $0 | $18,000 |
Amount given to charity | $100,000 | $82,000 |
1 Assumes 20% capital gains tax rate and no fluctuation in value.
A DAF has several other advantages beyond the potential tax benefits listed above:
As outlined above, DAFs have several key benefits, but there are important trade-offs to consider, too:
This table explains how to contribute to a DAF along with other details about each option.
Edward Jones Charitable Gift Fund | Cash | Charitable lead or remainder trust | Private foundation | |
---|---|---|---|---|
Types of organizations you can support | IRS-approved public charities | Public charities, private foundations and individuals (not all are eligible for an income tax deduction) | IRS-approved public charities and some foundations | As long as the grant is made for charitable purposes, many different organizations and individuals |
Setup cost, maintenance and time to establish | Lower | Lower | Higher | Higher |
Potential to grow the assets | Yes | No | Yes | Yes |
Investment options | One of six professionally managed portfolios | N/A | A broader set of investment options | A broader set of investment options |
Income tax deduction limit as a percentage of AGI | 60% for cash, 30% for appreciated securities | 100%* | Depends on the type of charity and trust | 30% for cash, 20% for appreciated securities |
Tax on investment income | 0% | N/A | Depends on the nature of the trust | 1.39% of net investment income |
Ability to donate to the charity anonymously | Yes | No | Yes | No |
*The CARES Act increased this amount from 60% to 100% through 2021. In 2022, the limit you can deduct in any calendar year will revert to 60% with a five-year carry forward. These limits may be changed by law or regulation.
Additional considerations and rules:
If you’re interested in learning more about how the Edward Jones Charitable Gift Fund can help you fulfill your charitable giving goals, reach out to an Edward Jones financial advisor for a discussion today.
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