Donor Advised Funds

Contingency Fund or Answer to the Church's Prayer?

Many congregations are struggling to stay within their budgets and make ends meet. And, of course, there are unexpected demands on even the most well-managed budgets. How does your congregation find enough money during this very slow economy and higher unemployment to pay the bills and manage unforeseen developments such as building repairs, disaster relief, mission work and special projects?

Have you thought of developing an emergency fund that can help you during this very “rainy” economic season? There is a creative type of fund that allows parishioners to donate to what some might refer to as a “Rainy Day Fund” – that something extra set aside for just such contingencies.  An added benefit is that this fund can grow in value while it is sitting there waiting for the “rainy day” when it will be needed.

This is how such a fund works.  Let us say you have some parishioners with a few extra dollars.  They donate money or other assets to this fund and they get a tax credit for their donations.  This special fund is called a Donor-Advised Fund.  The fund is owned by the congregation and is professionally managed.  The minimum contribution is a $250 donation. This type of fund can accommodate donations from parishioners with virtually any charitable gifting means – from a few dollars to an unlimited donation.

Parishioners with stock may be interested in contributing to the Donor-Advised Fund. They could be interested in donating stock with substantial capital gains, especially since the allowable charitable tax deduction may be lowered next year.  Also, by donating stock directly to the Donor-Advised Fund they avoid the capital gains tax.

The Church completes the Donor-Advised Fund application and it becomes the owner of the fund.  It can then have access to the fund for those unexpected contingencies without impacting the regular operating budget, and when they need it. Because money used from the fund is a Donor-Advised distribution, it offers the flexibility of larger non-designated donations.  It seems to me as though it could be the answer to the Church’s prayers.

This article was written by Richard E. Deam at Deamoak’s Planning Services – (845)-897-2034 /