Making a Difference
A Vermont woman expands her giving through a donor advised fund at the Vermont Community Foundation
When Marilyn Bridger was growing up, she helped her mother Anne design sets for an amateur opera company in their town. She still remembers the magic of hearing the aria from "Madame Butterfly" for the first time.
Later, Marilyn* delivered meals to people in need through an effort organized by her family's church. After college, Marilyn pursued a career in public health.
These experiences helped shaped Marilyn's life. The 73-year-old has spent many hours volunteering. She's also been a longtime charitable supporter of families in need, the arts, and other causes including land conservation. Now she wants to increase her giving and do so through her donor advised fund at the Vermont Community Foundation.
"It's important to me to give in ways that help families thrive, both in terms of the basics and in ways that lift the spirit through the arts or by connecting with nature, " she said.
One of the factors driving her decision: Marilyn's estate has grown significantly in the past five years with the death of her parents and her husband Ned, an attorney, loving father to their two grown children, and avid outdoorsman. She's realized that with more resources, she can have a bigger impact.
The couple first opened a donor advised fund (DAF) with the Vermont Community Foundation when they were in their 60s, with a deposit of $50,000. Ned handled the charitable giving account. He replenished it annually with modest amounts—and directed gifts to causes they both cared about. They also made donations outside their donor advised fund, with Ned handling the paperwork.
Advantages of a Donor Advised Fund at the Vermont Community Foundation
Charitable individuals can take a tax deduction for the full amount they deposit into a donor advised fund, even if they choose to grant out the money over many years, or assign a successor to the account to direct giving after the original fundholder has died. This reduces current and future tax liabilities and frees up the savings for new giving and additional DAF contributions. Non-cash assets of stock, real estate, and company shares can also be contributed to a DAF in a tax advantageous way.
DAF funds invested in a pooled account with the Vermont Community Foundation appreciate tax-free and help the fund grow, resulting in more dollars available to give. Grants from donor advised funds can be made to any 501c3 nonprofit and may be given anonymously. This flexibility and the fact that as the DAF sponsor the Vermont Community Foundation handles all paperwork connected to conveying grants, investing DAF funds, and completing tax filings are additional benefits.
Marilyn also made some big decisions connected to her estate planning. With the go-ahead from her attorney and her accountant, she decided to make her donor advised fund the beneficiary of her Individual Retirement Account (IRA), which has a balance of over $1 million.
Giving the IRA to her charitable account at death is another way to make the DAF a vehicle for good works well into the future.
The decision also makes good tax sense. Marilyn and her advisors crunched the numbers and concluded that it could help keep the value of her assets below the estate tax threshold.
The dramatic appreciation of real estate that she and Ned inherited from their parents, along with the increasing value of their longtime Lake Champlain home and other assets, mean that without taking action, a portion of Marilyn's estate would likely go over the tax exempt threshold and be taxed at up to 40 percent.
The decision on the IRA also resonated with her adult children, who are have successful careers and are financially secure.
Marilyn wants them and her five grandchildren to inherit some of her estate. But the whole family agrees that they'd like to make a meaningful commitment to charitable endeavors.
"We've talked it over, and we'd all feel really good if a sizable chunk went to nonprofit work," Marilyn said. With her adult children now assigned as successors to her DAF, she is confident that they will be good stewards of the fund well into the future.
Marilyn is considering other steps, too. She might give some of her real estate or stock directly to her DAF, which is permissible under IRS tax laws. This can be another way to make giving go further and reduce tax liabilities.
"I'm still in discussions with my philanthropic advisor about other aspects of my estate and how they might relate to my DAF, but for now, I feel great about our decisions, and I think my husband Ned would too," Marilyn said.
"I now know a lot more about the DAF as a tool for giving and think it can serve my goals very well. I'm feeling a combination of relief and excitement, knowing some of these big decisions are resolved and that our family can make charitable contributions to the causes we care about well into the future."
*This case study uses a pseudonym
Learn more about opening a donor advised fund at the Vermont Community Foundation.
Email us at philanthropy@vermontcf.org or call us at (802) 388-3355, opt. 5.
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