‍A donor-advised fund, also known as a DAF, is one of the most commonly-used vehicles for charitable giving.

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With a donor-advised fund, cash or securities are deposited into an account that can grow in value and later be granted out to charities. Donors receive a charitable deduction for their donations. In exchange for their irrevocable gift to the sponsoring organization, the donors can then recommend grants to qualified charities and advise on how the gift is invested.

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Each donor-advised fund is a segregated fund maintained by a qualified public charity which is created when a donor makes a gift of cash or assets. This gift allows the donor to receive an immediate income tax deduction and avoid the capital gains tax on appreciated assets donated to the fund. The donor can make grant recommendations to charities at any point during his or her lifetime. Future generations can be appointed to make recommendations for the rest of their lives.

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Here are some of the benefits of establishing a DAF:

• Donor-advised funds allow individuals to avoid capital gains taxes. Donors can claim further tax deduction benefits based on the asset they are donating. For instance, if you donate cash, you will generally be eligible for an income tax deduction of up to 60% of your adjusted gross income. If you donate long-term appreciated securities directly to the charity you can be eligible for an income tax deduction of the full fair-market value of the asset, up to 30% of your adjusted gross income.

• Donor-advised funds offer tax free growth. Contributions to a donor-advised fund grow over time, allowing individuals to build more funds to make more donations.

• Donor-advised funds offer investment flexibility. The Ingalls DAF is especially designed to offer a wide range of investment options.

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Donor-advised funds are a great vehicle to use to establish a legacy of giving. Heirs can be part of the process of distributing grants to charity and can be named successor grant advisors to allow the donor-advised fund to continue for several generations.

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A private foundation, by contrast, is an independent charitable corporation or trust established as a tax-exempt entity under Section 501(c)(3) of the Internal Revenue Code.

Private foundations make charitable distributions throughout a taxable year and are funded entirely through contributions from an individual, family, or corporate donors.

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Donors who establish private foundations exercise greater control over the operation and grant-making activities of the foundation compared to other charitable initiatives.

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Private foundations allow a charitable income tax deduction and possible transfer tax deductions for contributions made to the foundation, which include:

• An income tax deduction of up to 30% of the donor’s adjusted gross income for any amount contributed.

• No capital gains tax on highly appreciated assets donated to the foundation, generally deductible up to 20% of the donor’s adjusted gross income.

• No federal or state estate taxes on assets donated to the foundation.

Private foundations are required to pay a nominal excise tax of 1.39% on their net investment income. The foundation must also adhere to federal regulations requiring a minimum annual distribution to charitable organizations, which is generally 5% of its assets.

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Private foundations demand increased administrational and operational functions relative to DAFs (this is the key distinction between these and DAFs). The foundations require specific bylaws and are overseen by appointed trustees or directors. It is essential to consider the increased administrative workload involved in setting up and managing a foundation.

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As with any financial decision, before deciding whether a DAF, a foundation or a simple charitable donation makes sense for you, we recommend that you contact your Ingalls advisor to analyze your unique goals for your family and your philanthropy.

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_{The material is not to be reproduced or distributed to others without Ingalls & Snyder, LLC’s (“Ingalls” or the “Firm”) express written consent. This material is being provided for informational purposes and any opinions expressed in this material are only opinions at the time of writing. Nothing provided by Ingalls should be considered tax or legal advice, and clients should seek advice from their tax and legal professionals. Bridgehampton is a team at Ingalls & Snyder, LLC, an investment advisor registered with the Securities & Exchange Commission and a FINRA member broker dealer. More information including the firm’s Form ADV Brochure and Form CRS can be found at https://www.ingalls.net/importantinformation.}