Alternative charity – Donor-advised funds thrive

Donor-advised funds are an increasingly popular form of charity, Fortune reported in its June 12 issue.

The largest of these funds, the Fidelity Charitable Gift Fund, took in $870 million last year and is the third largest charity in the U.S.

Donor-advised funds enable donors to make an irrevocable gift of at least $10,000 in securities or cash. The fund qualifies as a charity, so the donation is tax deductible.

If donors give appreciated securities, the fund can sell them without paying capital gains taxes, and then invest the earnings in mutual funds. Donors do not have to pick a charity to receive the money right away – the money will grow interest-free indefinitely.

Donors may make gifts through the fund for the rest of their lives, with the remainder going to charity upon the donor’s death. Donors may also name an heir as successor to the fund.

Most donor-advised funds require no up-front fees and charge maintenance fees of less than 3 percent a year, in addition to the usual portfolio-management fees.

For full text, go to Fortune.

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