There was a lot of attention brought to the subject of philanthropy recently when Warren Buffet and Bill Gates teamed up to issue the "Billionaire Challenge." They called on all of the country's billionaires to make a pledge promising to give away at least half of their fortunes over a period of time. Buffet is walking the walk; he says he will eventually give away just about all of his vast wealth, and he has given $8 billion to the Bill & Melinda Gates Foundation over the past several years alone.
When you have been successful during your life and you recognize that you have more than ample resources to take care of your family after you're gone it is natural to consider charitable giving. The trick is to find an efficient way of doing so, and this is why the donor advised fund has been steadily growing in popularity among those who are looking for a way to give something back.
A donor advised fund is an entity that is maintained by a third party that provides the infrastructure through which many people can make charitable contributions to multiple charities through one act of giving. These third parties include community funds, for-profit financial services companies, and charitable giving programs. You make donations into the fund and as the name of the vehicle suggests, you as the donor can make recommendations concerning how you would like the assets to be invested and which charities you would like to support.
From a tax perspective donor advised funds can be appealing because you can take advantage of the deduction that comes with a contribution quickly and efficiently and decide on your recommendations later. In addition, should you decide that you would like to contribute appreciated securities to the fund you may deduct the entire market value of the donation but you incur no capital gains tax liability.
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