What Donors Often Misunderstand About Donor-Advised Funds

While donor-advised funds continue to grow in popularity as philanthropic and tax-planning vehicles, many clients still don’t understand fully how they work, The Wall Street Journal writes in an article about avoiding “common traps” in giving to such funds.

Contributors receive an immediate tax deduction on money they put into donor-advised funds, which can grow tax-free before being disbursed to nonprofit groups. Financial advisers say clients often mistakenly believe they will get a second tax break when the money goes to a charity or that they can receive goods and services from organizations that get grants through the funds.