Ways of gifting charitable endowments with donor advised funds
There are many benefits to gifting through a Donor Advised Fund (DAF) for endowment purposes, both for the donor and their preferred charitable cause. An Endowment Fund approach to gifting can support areas where the need for dependable, ongoing funding is essential such as in hospitals, schools and research centres. This giving structure can also support other areas of need such as new building projects, maintaining or purchasing equipment that can have a long-term positive impact.
These are just a few examples of the ongoing support that is possible with recurring charitable income from a DAF structured Endowment Fund. The ways of gifting a charitable endowment through a Gift Funds Canada Donor Advised Fund can be grouped into two broad categories—a current gift of capital and a deferred gift of capital. In this article we outline the aspects and benefits to each of these ways of giving.
A current gift of capital to a Donor Advised Fund for Endowment Purposes
Donors who choose to give to a DAF that has been established for endowment purposes can give cash, publicly traded securities or a gift-in-kind that has an immediately realizable cash value. This is an appealing option for donors who might be approaching a significant tax event or wish to align their gift with an immediate need at their preferred charitable organization.
One of the key aspects that groups these gift types together is the benefit of an immediate tax receipt to the donor. In this situation, all gifts-in-kind will receive an immediate donation receipt for the fair market value of a donated asset. In the case of publicly traded securities, additional tax benefits may apply to a gift of appreciated securities. As well, special rules effectively eliminate the capital gains tax and the donor receives a donation receipt for the full value of the donated securities. Some foreign publicly traded securities also benefit from this rule. A professional advisor at Gift Funds Canada can assist donors interested in this giving option.
A deferred gift of capital to a Donor Advised Fund for Endowment Purposes
An option for donors who wish to use the DAF structure to make an endowed gift but would like to defer their gift until a later date that best suits their philanthropic interests is a deferred gift of capital to a DAF.
Deferred gifts of capital might include a gift of life insurance, a traditional bequest under the terms of a Will, a beneficiary designation of a RRSP, RRIF or TFSA account or a residual interest gift may also be gifted to a DAF. Upon maturity of the life insurance policy, probate of a Will or the receipt of future proceeds from the sale of a gifted asset, the donated funds will be placed into a DAF on behalf of the donor with instructions stipulating the use of funds. The donor’s family, a designated successor or professional advisor like Gift Funds Canada may take responsibility for ensuring the donated funds are used and invested in accordance with the donor’s wishes.