Charitable Gift Funds – Are They The Right Choice?

In the last few years, charitable gift funds or donor-advised funds have been a hot topic. Everyone suddenly seems to be talking of giving or receiving one of these. Why? Let’s understand what the buzz is all about. Whatever name they are called by, charity gift funds are nothing but public charities that have a definite tax advantage, much like the charity you give the synagogue, church or your Alma Mater even.This is how it works.By having a charitable gift fund, you may set up a charity fund of your own liking. You can then recommend your favored charities. In essence, it allows you to set up a charitable foundation minus the cost of establishing such a foundation. The administration of charitable gift funds is simple. Once you set up a request for setting up a fund in the name of a favored charity, the first step is for the administrators to check out whether the charity actually exists and whether it qualifies. If the charity qualifies, then, the requested contribution is processed. Administrators generally get a small fee for managing these funds and many charities get a huge advantage from the money disbursed through these funds. So, how do the donors benefit? Well, there is a definite tax advantage. By investing in charitable gift funds, donors can avail of tax benefit even before they have decided on which charity to support.  Since the tax benefit is immediate, you get immediate benefit even though the fund holds the money that you have invested for a number of years more. These contributions also reduce the tax liability of your estate. Although charitable gift funds are the in thing these days, there is nothing new about them. In fact, they have been around for more than 30 years now. However, they started hogging the limelight when they attracted the attention of mutual funds and other investment companies. For a good number of people, charitable tax funds are a means to an end – of getting tax rebates. However, there are a few people who avail of these funds purely out of their desire to do something helpful. For such people, these funds are invaluable because they are easy to set up.As with everything else, there are some risks associated with charity gift funds. For one thing, there are no guidelines for tax benefits. Besides, tax authorities are sniffing the air rather hard. So they have their eyes fixed on anybody investing in these funds. But, when compared to the joy of giving, the small fear caused by these risks is generally overlooked by people who want to make a meaningful contribution.