American Endowment Foundation on Donor Advised Funds

by News Guy on April 5, 2010

Changes to the 2010 tax laws allow a wide range of investors significant freedom to convert traditional IRAs to Roth IRAs, which offer numerous long-term financial planning and estate tax advantages.  Yet money moved from an IRA to a Roth is taxed by the IRS as ordinary income.

An alternative: Investors can convert Roth IRAs yet mitigate their tax liabilities through an offsetting, tax-deductible contribution to a donor advised fund (DAF). A DAF is a simple and cost-effective alternative to a private foundation.

Benefits  include:

  • The tax deduction from the DAF can be used to reduce or offset federal income taxes due on the Roth conversion,
  • Investors enjoy immediate tax benefits of the DAF while deciding later what charities to support,
  • No capital gains tax on long-term, appreciated assets contributed to the DAF,
  • Larger tax-free withdrawals from the Roth, since there are no required minimum distributions,
  • No estate taxes on the DAF, and
  • Assets in the Roth and the DAF grow tax free.

Founded in 1993, American Endowment Foundation ( is the nation’s leading independent sponsor of DAFs.  For the past eight years, it has been awarded the highest rating by Charity Navigator, America’s largest independent charity evaluator.

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