Donor-Advised Funds: The Gift That Keeps on Giving

Expert guidance on how this charitable vehicle can make a difference.

Photo of Jacob Pruitt
(Image credit: Photo by Tara Patty)

Jacob Pruitt is the president of Fidelity Charitable, the nation’s largest donor-advised fund.

For someone who is new to donor-advised funds, what do they do and how do they work? They’re similar to an investment account. You put money or other assets into an account, and if you itemize, you can claim the tax deduction up front. You have the ability to invest your money in a variety of mutual funds, including funds that focus on environmental, social and governance (ESG) issues. Then you identify an IRS-approved 501(c)(3) nonprofit you want to support. Fidelity Charitable can accept a variety of assets, including publicly held stocks, bonds and mutual funds, shares in privately held companies and private-equity firms, and restricted stock. We’ll convert those assets to cash and put them in your charitable giving account. Even if you don’t itemize, giving an appreciated asset to a donor-advised fund provides a tax benefit because you may eliminate paying taxes on capital gains you’ve accumulated through the years.

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Emma Patch
Staff Writer, Kiplinger's Personal Finance

Emma Patch joined Kiplinger in 2020. She previously interned for Kiplinger's Retirement Report and before that, for a boutique investment firm in New York City. She served as editor-at-large and features editor for Middlebury College's student newspaper, The Campus. She specializes in travel, student debt and a number of other personal finance topics. Born in London, Emma grew up in Connecticut and now lives in Washington, D.C.