Donor-Advised Fund

A Donor-advised Fund is a charitable giving vehicle administered by the Lake Mills Area Community Foundation and created for the purpose of managing charitable donations on behalf of a family or individual. You may create a named fund, e.g., The Smith Family Fund, from which the Foundation will make grants, asking you or your descendents from time-to-time for suggestions as to where grants from the fund might be directed. A donor-advised fund offers the opportunity to create an easy-to-establish, low cost, flexible vehicle for charitable giving as an alternative to direct giving or creating a private foundation. Donors enjoy administrative convenience, cost savings and tax advantages by conducting their grant-making through the fund while providing input on the manner in which the fund’s assets may be directed for the public good.

You Minimize Set-up Costs and Maximize Your Tax Deduction. Because the fund is housed in a public charity, donors receive the maximum tax deduction available. If an appreciated asset is the basis for your donation, you can avoid excise taxes (e.g., capital gains taxes) and other restrictions imposed on gifting to a private foundation. Further, donors do not incur the cost of establishing and administering a private foundation, including staffing and legal fees. Since the maximum tax deduction is received by the donor at the time of the gift, the foundation administering the fund gains full control over the contribution, granting the donor advisory status. As such, they are not legally bound to the donor, but make grants to other public charities upon the donor's recommendation.

Recent Changes to Tax Laws Regarding Donor-Advised Funds. While private foundations in the United States are heavily regulated by the Internal Revenue Service, including rules on oversight and minimum annual payouts, donor-advised funds housed in public charities are not subject to the same tax restrictions. On August 17, 2006, President Bush signed the Pension Protection Act of 2006 (H.R. 4) into law, which includes a number of changes to the regulatory framework for donor-advised funds. The sections dealing with donor-advised funds include the legal definition of a donor-advised fund, a list of prohibited payments to donors and advisers to donor-advised fund, new rules about what grants can be made from donor-advised funds, and the documentation required for all contributions to donor-advised funds.

Minimum Donation to Establish a Donor-advised Fund: $10,000