A donor-advised fund lets you take a tax deduction now and make your giving decision later. By Kimberly Lankford, Contributing Editor December 21, 2009 I would like to make some charitable contributions in 2009, but I haven’t had time to research the charities yet. I heard that a donor-advised fund can give you extra time to make charitable contributions for the year. How does this work, and is it too late to open one of these funds?A donor-advised fund can be a great way to buy extra time to make decisions about your charitable contributions, and it’s not too late to open an account and get a charitable deduction for 2009. Many mutual fund companies, brokerage firms and community foundations offer donor-advised funds. You can take a charitable deduction as soon as you deposit the money with a donor-advised fund, but you then have unlimited time to decide which charities to support. Funds generally offer several investment pools to choose among; the money you deposit will grow until you distribute it as grants to the charities. Vanguard’s Charitable Endowment Program, for example, lets you choose from among nine investment pools, including some single-fund pools (such as Vanguard Total International Stock or Total U.S. Stock) and multi-fund pools (the Growth Pool, for example, keeps 80% of its money in Vanguard Total Stock Market Index and 20% in Total Bond Market Index; the Gift Preservation Pool is invested 50% in Vanguard’s Short-Term Investment-Grade fund and 50% in its Prime Money-Market fund). You can spread the money among any of these investment pools. Advertisement The minimum initial contribution to a donor-advised fund tends to be from $5,000 to $25,000, depending on the firm. ,For example, the minimum is $5,000 with Fidelity and Charles Schwab, $10,000 with T. Rowe Price, and $25,000 with Vanguard. But several family members or friends can join together and each make smaller contributions, as long as the total adds up to the minimum initial contribution. It’s a great way to get extended family members involved and to teach philanthropy to children. Some Community Foundations offer donor-advised funds with lower minimum initial investments. See the Community Foundation Locator to find a community foundation in your area. Once you set up an account with a donor-advised fund, you can usually make grants of as little as $250 or $500 to any 501(c)3 organization. And most firms that offer these funds provide resources to help you research the charities. It’s easy to make the grants online. You still have some time to open an account and make contributions that will count for a 2009 charitable deduction. At most firms, it takes just a few minutes to open a donor-advised fund online. Then you can make your contribution by check, by electronic funds transfer, or by giving shares of stock or mutual funds. (Giving appreciated stock can provide a double tax break -- you can take a charitable deduction for the current value of the shares, and you avoid paying capital-gains taxes on the investment’s gains through the years.) Advertisement If you’re contributing stock or fund shares, the donor-advised fund must receive the securities from your broker by December 31 to count for a 2009 deduction. So you may need to start moving those assets a few days in advance. “Sending a check is the easiest way to make a last-minute contribution,” says Ben Pierce, executive vice-president of Vanguard’s Charitable Endowment Program. You can qualify for a 2009 tax deduction as long as your check is dated and postmarked by December 31. Some firms, such as Fidelity, will let you make an electronic funds transfer as late as 11:59 p.m. on December 31. Contact the mutual fund company or brokerage firm in advance to find out about the minimum initial investment, to whom the check should be written and where to send it (or how to transfer the funds electronically). See Start Your Own Charity for more information about donor-advised funds and What You’ll Need to Get Started for account minimums and fees for donor-advised funds. Got a question? E-mail me at firstname.lastname@example.org. Got a question? Ask Kim at email@example.com.