September 19 , 2013 ● Facilitator: Clyde W. Kunz, CFRE

1. Donor Advised FundsWhat Are They? How do They Compare to Private Foundations? What are Their Tax Benefits? are September 19, 2013 ● Facilitator: Clyde W. Kunz, CFRE

2. Donor Advised Funds Clyde Kunz & Associates LLC • Definition & History • Advantages of DAFs Compared to: • Direct Giving to Charities • Private Foundations or Supporting Organizations • Regulations Controlling DAFs • Issues to Consider • National & Local DAF Administrators

3. DAFs: What are they? Clyde Kunz & Associates LLC Charitable giving vehicle Administered by a public charity Established by an organization, family or individual A gift to the administrating public charity Used to make contributions to other charitable organizations (through recommendation process)

4. History of DAFs Clyde Kunz & Associates LLC First established in 1931 by New York Community Foundation Now offered by commercial sponsors, educational institutions, and independent charities The fastest-growing charitable giving vehicle in the U.S. More than 175,000 DAFs, holding more than $37 billion!

5. DAFs Continue to Grow! Clyde Kunz & Associates LLC

6. How DAFs Work Clyde Kunz & Associates LLC • Donation of asset(s) to an administering public charity • Tax deduction in year donation is made • Administering public charity invests funds and provides statements • Donor makes recommendations of distribution to administering public charity • Administering charity generally follows recommendations (but doesn’t have to!)

7. Who Should Consider a DAF? Clyde Kunz & Associates LLC Individuals with a need for a significant charitable tax deduction in a given year Individuals or families who may wish to minimize how many solicitations they receive by “hiding” their giving through an administrator Those who may wish to align their giving with the values/giving of the administering organization Those making numerous charitable gifts

8. Regulation of DAFs Clyde Kunz & Associates LLC • Regulated by the IRS, including the Pension Protection Act of 2006: • Provides legal definition • List of prohibited payments to donors & advisors • Specifies what grants can be made, and what kind of documentation is needed for DAF contributions • Established with donations of appreciated securities or other assets at full market value, avoiding capital gains taxes

9. Why Not Give Directly? • Administrator has experience with DAFs • Can make multiple donations with one securities trade • Tax-deduction is taken up-front; giving can be over several years if the donor wishes • Some DAFs may allow gifts to foreign charities • Costs involved in establishing or administering a DAF • Charity may not be set up to accept securities • If giving to multiple charities, involves several transactions • Must take tax deduction for gifts in the year in which gifts are made. • Gifts to foreign charities may not be allowed • No costs involved in making gifts Donor Advised Fund Direct Gift to Charity Clyde Kunz & Associates LLC

10. Why Not a Foundation? • Donor discretion • No new legal entity • Overseen by administrator’s board • Investments controlled by administrating agency • More advantageous limits on deductibility of contributions • No excise tax • Quarterly estimated taxes not required • 990-PF is public record • New legal entity is established • Board of directors must be established • Donor retains control of investment decisions • More restrictive limits on deductibility of contributions • Excise tax up to 2% • Quarterly estimated taxes required Donor Advised Fund Private Foundation Clyde Kunz & Associates LLC

11. Why Not a Foundation? • No legal requirement for annual distributions • Distributions: donor makes recommendations • No IRS filing requirement • No legal fees to establish • Administrator provides tax reporting under its umbrella • Management fees 1%-2.5% • Minimum contribution amounts vary, may be as low as $2,500 • 5% qualifying distributions based on FMV of assets • Donor (within board & regulatory parameters) controls distributions • Must file 990-PF • Legal fees to start up foundation • Tax reporting provided by accountant or service provider • Service provider assesses fees • No statutory minimum, but usually $1million+ Donor Advised Fund Private Foundation Clyde Kunz & Associates LLC

12. Donors need to realize that DAF no longer belongs to them • Administering charity usually follows, but does not have to follow donor’s specific recommendations • DAF grants cannot be used to pay existing or future pledges to charity • Recipient charities cannot provide benefits to donors for DAF grants received • No “tables” or “tickets” to events • No “donor club” benefits of any kind Clyde Kunz & Associates LLC

13. Thank You! Clyde W. Kunz, CFRE ● (520) 977-4019 ● Kunz@Cox.net www.ClydeKunz.com (“Resources” page for copy of PowerPoint presentation)