Alternative Methods for Philanthropic Giving to Nonprofits

Qualified Charitable Distributions (QCD)

An increasingly popular form of gifting to nonprofits is via the QCD provision that is available to persons with IRA or tax-deferred funds who are at least 70 1/2 years of age. Each year an IRA owner can pay directly from an IRA to a charitable organization — the amount can be up to $108,000 for an individual and $216,000 for a married couple. In addition, individual IRA owners who are at least 73 years of age and who are required to take “Required Minimum Distributions” from their IRA’s can direct funds to an eligible charitable organization as a permitted alternative to the RMD. Professional assistance from a financial advisor or tax-related expert is needed to accommodate this form of charitable giving.

Donor Advised Funds (DAF)

This is a gifting arrangement where an individual, family or business can establish a fund, typically with a Community Foundation or private investment house, wherein the fund is guided by “donor advisors” (usually family members or business associates) that recommend grants to designated charitable organizations — on a periodic basis, both short term and long term. It is a simple and direct form of gifting that does not involve an application process by the recipient charitable organization. The donor is typically required to establish an initial corpus (e.g., $10,000) to which additional contributions can be made. The advantage of this type of gifting is that it can continue long after the original donor(s) pass on — thereby creating a lasting funding legacy for the original donor(s) while also providing an enduring funding base for the nonprofit organization. This form of gifting also requires professional legal, financial and tax-related assistance. Most Community Foundations and private investment houses have professional staff to facilitate this gifting process.

Estate Plans, Life Insurance, Real Estate, Mutual Funds

An increasing number of individuals are providing support for their favorite charitable organizations via these forms of gifting (other financial assets such as closely held businesses, intellectual property, and publicly traded funds are also eligible for gifting) in their overall financial planning. Designating such support for preferred charities as beneficiaries in wills, trusts and other estate planning vehicles can readily be achieved with the appropriate legal and financial guidance.

Charitable Gift Annuities

This is a funding arrangement wherein a donor invests in a financial instrument that provides an income stream to one or two individuals during their lifetimes with the remainder of the gift supporting a named charitable organization after the individual(s) pass on. Again, this gifting form requires professional assistance, but many nonprofit organizations can help with establishing such an arrangement.