Editor’s note: The following article is not considered financial or legal advice.

Donor-advised funds let you support causes close to your heart. They’re great for generating connections and conversations around giving.

Did you know they can also save money and headaches at tax time?

For one thing, instead of corralling receipts and entering all your individual donations for the year, you only have to list one: in this case, the Presbyterian Foundation.

But there’s more.

Sherry Kenney and her husband, Andy, established a donor-advised fund (DAF) with the Presbyterian Foundation in 2016. A Certified Financial Planner, she had joined the Foundation staff as a Ministry Relations Officer in 2013.

“We have always been interested in supporting Presbyterian institutions,” said Kenney, who is now retired. “I got that from my parents and my Hester grandparents, which is why we named our fund the Hester-Kenney Family Fund.”

You can create a DAF with $2,500 or more and make grants from it to charities of your choice. It functions like a family foundation.

The Kenneys have donated to their local church, Central Presbyterian in Denver; and to Austin College, Austin Presbyterian Theological Seminary and Presbyterian Pan American School through their DAF.

However, donors can support just about any nonprofit through a DAF.

A less taxing transition

Contributing to a DAF can also offset an unusual taxable event, Kenney said, and it’s a strategy any taxpayer with charitable intent should consider.

Last year, the Kenneys sold their Denver home of 31 years. Their timing was good for the market and Andy, an architect, had remodeled and updated the house multiple times. The couple received several offers above the asking price, allowing them to purchase a condo in Denver and pay off the mortgage on a condo they’d bought in Arizona the year before. They essentially converted the equity in one home to outright ownership of two smaller homes, Kenney said.

Still, she was concerned that even with the tax exemption allowed for the capital gain on a home sale, they might end up with a big tax liability. That worry sometimes keeps Baby Boomers who want or need to downsize from doing so, she said.

Anticipating that tax liability for 2023, the Kenneys had made most of their charitable gifts for the year from current income. After getting an estimate of gains in their investment portfolio from their advisor, Kenney did a rough fourth-quarter calculation of taxes.

“I saw that we would still owe money to the IRS in April of 2024,” she said. “We needed another meaningful deduction in 2023, and our DAF was the answer.”

The couple forecast their charitable giving for 2024 and worked with their advisor to pick investments with unrealized long-term capital gains that totaled the amount, she said.

“By transferring appreciated securities to our DAF, we were able to claim their entire value as a deduction. That’s because when they were sold by the Presbyterian Foundation, itself a nonprofit, the gain was not taxed,” she said.

Kenney said she wished she’d realized the full range of DAF benefits while still practicing as a financial planner. Many financial institutions offer donor-advised funds, but the Foundation offers responsible ESG (environmental, social and governance) investments and supports Presbyterian churches and ministries, she said.

Giving smarter

Kenney said she and her husband enjoy selecting charitable beneficiaries with their adult son and daughter and anticipate including their grandchildren, who are just 1 and 4 now. (However, she just got a tax credit by donating through their DAF to their granddaughter’s preschool.)

Grants are made to their pastor son’s church in Texas, the schools their daughter has attended and activities she was involved with, such as Girl Scouts.

“My thing with my kids is, I’ll support the things they love if they’re also supporting them,” Kenney said.

The Junior League of Denver is another recipient. “I made so many close friends, and this was a primary source of my volunteerism for many years. We also support Andy’s alma mater, the University of Colorado. Our list is pretty eclectic.

“Andy and I love to give and we want to give as much as we can,” Kenney said. “If we’re tax-savvy in our giving, we have more to give.”

If you’d like to talk about strategies for generosity, please contact your Ministry Relations Officer. You can find yours here.