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.
How does a donor-advised fund work?
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's operated by a sponsor or sponsoring organization that invests and manages the donated assets. After you've made the initial gift and received your tax deduction, you make grants over time to IRS-approved charities.
DAFs have grown in popularity amid heightened interest in charitable giving. A recent report from the Giving USA Foundation found Americans donated an estimated $557.16 billion to charities in 2023, which is an all-time high in current dollars.
Donor-advised fund tax benefits
- Stacking or bunching your giving: If you plan to make consistent charitable contributions, you can use a DAF to “bunch” or “stack” your charitable gifts by making the equivalent of multiple annual gifts in one year.
This means you may be able to itemize your deductions, potentially realizing a larger deduction in the current tax year, rather than relying on the standard deduction. Then you can request a grant be made over subsequent years to the charities you support. Remember: You’ll receive the tax deduction in the year you contribute to the fund, not when the money is granted to the charity.
This strategy may also be beneficial if you have had an unusually high-income year, when your marginal tax rate is also typically higher, so the benefits from charitable giving in those years would be greater than in subsequent, lower-income years.
Similarly, you may want to consider giving now if you expect your taxable income to be lower in the future.
- Lowering capital gains: If you own investments that have significantly increased in value, contributing them to a charity or DAF allows you to avoid paying taxes on the capital gains. This means the charity receives more of the proceeds than if you were to sell the security and gift the after-tax proceeds. You can also take an income tax deduction for donations of securities.
- Potential reduction of taxable estate: Assets you contribute to a DAF are not included in your estate, so they don’t count toward your total estate value.
- Helping file your taxes: Using a DAF may improve your record-keeping for tax reporting purposes. Donating first to the fund and then granting to multiple charities allows for a single donation receipt. And as part of their services, the third-party administrators responsible for the day-to-day operations of a DAF will ensure the charities you support are approved by the IRS before fulfilling your grant request.
A DAF has several other advantages beyond the potential tax benefits listed above:
- A DAF allows your contributions to be invested, providing an opportunity for the money you put toward your charitable gifts to grow over time, tax free.
- These funds allow for joint or supervised charitable giving, which means you can pass along your values to your loved ones by sharing with them the principles of charitable giving. And naming your children or other people as successor advisors lets them continue making charitable gifts in your name after your death.
- A DAF can be a beneficiary of your will, trust, annuity, insurance contract, retirement plan or investment account.
- While family foundations offer more control over investment options, administration and granting, DAFs can offer many of the same benefits at a lower cost to set up and maintain.
- You can remain anonymous to the charities you support, if you choose.
- A DAF lets you honor a loved one’s legacy in two ways: You can designate a grant to be made in memory of your loved one, or a new DAF can be set up in their memory for friends and family to make contributions.
What is the Edward Jones Charitable Gift Fund?
The Edward Jones Charitable Gift Fund is a donor-advised fund offered by Edward Jones in conjunction with Renaissance Charitable Foundation Inc., which manages and administers the Fund. The Fund offers donors the opportunity to make tax deductible, irrevocable charitable contributions to an individual DAF while retaining certain advisory privileges over the contributions.
How can I use the Edward Jones Charitable Gift Fund?
Investing in DAFs typically follows the three-step progression summarized below:
- Contribute – A donor may make an irrevocable contribution of cash or marketable securities (and when appropriate, other unique assets) to the Edward Jones Charitable Gift Fund and receive an immediate charitable income tax deduction.
- Advise – The money in the Edward Jones Charitable Gift Fund is invested based on your preferences. Any investment growth is tax free, expanding your charitable impact.
- Recommend – You recommend grants or distributions to the charities you wish to support, when to support them and the amount you wish to give. Your grants may go only to IRS-approved charities.
How much do I need to participate in the Edward Jones Charitable Gift Fund?
The minimum initial contribution to the Edward Jones Charitable Gift Fund is $10,000. As a donor, when you contribute cash or securities to a DAF, you’ll receive an immediate tax deduction. Any growth to the assets you contribute is tax free. The Edward Jones Charitable Gift Fund can also accept gifts of other forms of property, such as artwork or other collectibles, and closely held business interests (C-corps, LLCs and LP interests) in appropriate circumstances.
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.
What should I consider when using the Edward Jones Charitable Gift Fund?
As outlined above, DAFs have several key benefits, but there are important trade-offs to consider, too:
- Contributions are irrevocable (once you contribute to the fund, you cannot access that money for anything other than charitable giving). Grants can only be made to IRS-approved charities. There are potential risks associated with the investments in the Fund. The Edward Jones Charitable Gift Fund invests in actively managed mutual funds, passively managed exchange-traded funds (ETFs) and open−end index mutual funds from most major asset classes. Mutual funds and ETFs may also invest in additional asset classes, such as real estate investment trusts (REITs), natural resources and emerging markets. The investments are managed according to the portfolio objectives you set with your financial advisor.
The Edward Jones Charitable Gift Fund offers seven professionally managed portfolios ranging from conservative to more aggressive. You can invest in up to two of these portfolios to align with the expected time horizon and risk tolerance of your granting. Every portfolio will carry some risk of loss. - While a DAF can be cost-effective and offers streamlined administration, using the Fund restricts the range of investments available to you. Other giving strategies may offer greater control. See the chart below for a comparison of various giving strategies.
- While a DAF is a low-cost alternative to a private foundation, it still has investment management and other fees associated with it.
- The minimum grant size is $250. Because of this, the Fund may not be suitable if you wish to give smaller amounts.
- There is a delay when you request a grant and when it is given to a charity. Grants generally cannot be used for specific fundraising events.
- Large gifts may reduce your tax bracket to a point where it may be more advantageous to split them among multiple years. Work with your tax professional on potential multiyear tax planning.
- As with any strategy involving taxes, there is a potential for laws and tax rates to change, making the use of a DAF less effective than expected.
Comparing donor-advised funds with other ways to make charitable gifts
This table explains key characteristics of the Edward Jones Charitable Gift Fund as well as other giving options.
| | 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 seven 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 and tangible personal property*, 30% for appreciated securities | 60% | 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 |
*Tangible personal property, such as collectibles, will be deemed as unrelated-use property when donated to a DAF. Therefore, the income-tax deduction will be the lesser of cost basis or fair market value.
How Edward Jones can help
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.
Donor-advised fund FAQs
