There’s more to charitable giving than you may realize. Here’s one method that provides flexibility and can help maximize your impact.
When it comes to helping others, people are opening their wallets—wide. Charitable giving topped $484.85 billion in 2021. Though the total giving grew 4% between 2020 and 2021 in current dollars, giving remained relatively flat when adjusted for inflation, with a change of -0.7%. On an individual basis, giving totaled an estimated $326.87 billion.1
There are approaches to philanthropy beyond the contribution of assets directly to a nonprofit. If you’re planning to give to charity before the end of the year but need more time to decide where to ultimately direct those assets, or would like to donate to a number of different causes over the course of many years, a donor advised fund (DAF), such as MS GIFT, may be a good option. Administered by a 501(c)(3) public charity, a DAF manages charitable donations on your behalf, while giving you important—and immediate—benefits.
The Features of Donor Advised Funds
DAFs offer several important features. Because DAFs are public charities, you’ll be eligible for a federal charitable income tax deduction when you contribute to the fund, even if:
- You want to delay decisions on where your money is going in order to develop a more thoughtful and impactful giving strategy
- You choose to give to qualifying public charities in installments over time
Let’s say you hold securities that have appreciated significantly. By donating the securities to a DAF, you will not owe the potential capital gains tax on the appreciation, and can give yourself time to decide when and where to make your charitable gifts. Between the time you make a donation to a DAF and when you finalize your giving strategy, your assets can be invested, with the potential to grow tax-free.
DAFs can also offer you a highly effective way to donate more complex assets, including shares of privately held companies, real estate, art, automobiles or other items that may need to be appraised.
Interested in donating cryptocurrency? You can now contribute gifts of crypto assets including Bitcoin and Ethereum to your Morgan Stanley GIFT account.
DAFs streamline your paperwork and administer disbursements, providing you with necessary documentation to claim a federal income tax deduction.2 You will also receive regular statements listing gifts, grants, fees, and investment performance for your records.
Morgan Stanley offers a suite of philanthropic services through the Morgan Stanley Global Impact Funding Trust (MS GIFT). The dedicated team of Morgan Stanley GIFT professionals can work with your Financial Advisor to help manage and administer your DAF.
Immediate Financial Benefit, Long-Term Influence
As stated above, DAFs allow you to recommend the amount and timing of grants to qualified charitable organizations, including other tax-exempt public nonprofit organizations, U.S. religious organizations, and U.S.-qualified domestic and foreign charities. At an additional cost, Morgan Stanley GIFT donors may also make recommendations to other domestic and foreign establishments that do not qualify as U.S. public charities.
DAF investment options typically include separately managed accounts, mutual funds, and exchange-traded funds. Morgan Stanley GIFT's Investing with Impact pools enable clients to align investment decisions with impact priorities across their portfolio. The Investing with Impact pools available through Morgan Stanley GIFT employ highly regarded third-party investment managers with demonstrated experience in generating positive environmental and social impact.
Most DAFs require a minimum initial contribution and minimum grant recommendation. Morgan Stanley GIFT's minimum initial contribution is $25,000 and the minimum grant recommendation is $250. For individuals, the maximum federal income tax deduction when gifting cash to a DAF is 60% of adjusted gross income (AGI), although you may carry forward deductions exceeding AGI limits for up to five years. Families and organizations may also make gifts to the DAF. Note: All donations you make to a DAF are irrevocable.
Giving Back as a Family
A DAF gives you the flexibility and time to involve family members in your strategic giving, providing you the opportunity to share the causes that are important to you and learn more about those important to your family members. You may name a Successor to continue managing your giving plan when you are no longer able to do so. And, if you already have a DAF, you may open a “NextGen DAF” with a lower minimum investment, giving your children and grandchildren the ability to give to their own causes and showing them the importance of giving.
Is a Donor Advised Fund Right for You?
DAFs are an accessible way to enjoy immediate tax benefits and are among the easiest and most tax-advantaged ways for you to facilitate your charitable giving. They are especially useful in years when you are seeking a charitable deduction, but also desire more time to finalize a giving strategy. By donating to a DAF by Dec. 31st, you could achieve your deduction target.
Consult your Financial Advisor to explore whether a DAF is right for you, as well as to create a structured giving approach that maximizes your impact, while providing more flexibility to realize your legacy.