Posted on: 29 August 2022
Donor-advised funds are investment vehicles that pay charities instead of you. They're investment funds, meaning they'll gain money if wisely invested and managed, just like your other funds would do in the same circumstances. However, the money pays out to charities instead of you. You can schedule payments at any time or schedule them to wait until you've died, at which point they'd be disbursed. These funds are very flexible if you tend to change your charitable focus from time to time.
Do You Need to Set up Separate Funds for Separate Charities?
No, you won't need to set up separate funds for different charities. You would set up one fund, name your chosen charities, and assign a percentage of the fund to each. You can also give your beneficiaries the legal power to choose the charities that will get the funds, too. Much of this can be done online now, although calling the fund's customer service center to double-check if there's anything else you should do is always a good idea.
Note, however, that you'll need separate funds if you're dividing your charitable giving between different sponsoring organizations, which are the entities that administer the funds and actual giving. You can't have a fund with one sponsor and tell them to divide it with another sponsor.
Can You Contribute More Money to an Existing Fund Later On?
Yes, you can. In fact, sponsors often require an initial contribution to start the fund, but some have a "zero money down" approach, where you can start the fund without adding money, and then add money later. Just be aware that you can't get that money back; the only way the money is released from the fund is if it goes to a charity. So, if you're not sure about how much to contribute, you can start a fund for a minimal amount and keep adding to it.
Can You Change Which Charity Receives the Money?
Yes, you can, and this is why donor-advised funds are so much better for leaving money to charity than setting up a direct donation through your estate. With the funds, you can add or remove charities through your online account (or, if the company doesn't have that function available online, you can call them). You don't have to change your estate plan in order to change this one aspect. You can also change how much of the funds go where, making these funds very convenient as you find more causes to support.Share