Handling a Donor Advised Fund

Bob's Avatar

Bob

20 Dec, 2021 10:09 PM

Hi,

I'm looking for advise for handling a Donor Advised Fund. (One makes contributions to such a fund and later advises the fund to send money to one or more charities. The contributions to the fund are tax deductible when they are made. It also turns out that the fund is an investment.) I'd like an account, perhaps an asset or investment, that keeps track of how much money is in the fund, but I'd like contributions to the fund to be in the tax-deductible category at the time of the contribution. Is there a way to do this?

Thanks,
Bob

  1. 1 Posted by dwg on 21 Dec, 2021 04:48 AM

    dwg's Avatar

    I'm a fellow user.

    The complication is that you want to recognise the donation when the transfer to the investment is done rather than when the monies are ultimately paid. It is a little out of the ordinary but can be done with a bit of thought.

    Given that you are only tracking the value of a fund and not the investments then the simplest type of account to use would be an Asset Account so my example is based on that.

    To enter the transaction go to the account and enter the date and the description. In the category scroll up to you see the split button and press this to get the split Window.

    On the first line enter a memo the category for the donation and the amount in the payment column, Then click on new split to add another split line, enter a memo a deposit for the amount of the donation, and a category, for this demo I used Miscellaneous Income. Add another split, again add a memo a payment for the amount of the donation and the asset account you want the money to go to, Press enter when you have finish and then Done to exist the split screen.

    You should have payment out of this account ,Money going into the asset account and an entry in the donations category.

    When the monies finally do got to the charity you will enter a payment out of the asset account and into a category, I would have to think it through, but potentially the same category as you selected for the income (Misc Inc in this case) to cancel each other out.

  2. 2 Posted by Bob Becker on 30 Dec, 2021 04:44 AM

    Bob Becker's Avatar

    dwg,

    Thanks for the suggestion.

    Bob

  3. 3 Posted by Bob Becker on 30 Dec, 2021 04:44 AM

    Bob Becker's Avatar

    dwg,

    Thanks for the suggestion.

    Bob

  4. 4 Posted by Ben on 05 Jan, 2022 04:56 PM

    Ben's Avatar

    I'd approach this a little differently. My worry is that if you record payments into the DAF as going into an asset account, they'll appear to be your assets in a balance report and won't show as expenditure at the time you make them. (If I understand correctly, once you've paid money into the DAF, it's not yours any longer and it should be counted as expenditure at once). It's tricky because Moneydance is only designed to track your assets and liabilities, and your DAF isn't either. Still, maybe tis approach would work for you:
    1. Set up three new expense categories, eg first "DAF", then "DAF deposit" and "DAF allocation".with "DAF" as their parent category.
    2. Record a payment to the DAF as an outgoing payment in the normal way, using category "DAF deposit", eg
    from your checking/current account on 31 Dec 2021
    payee: the charity adminstering your DAF
    category: DAF deposit
    payment: $100
    3. Later, record allocation of funds from the DAF account as a zero-sum split transaction, which you can do from any account. For example
    from your checking/current account, on 01 Jan 2022
    line 1 of the split
     category: DAF deposit
     payment: $75
    line 2
     memo: ultimate recipient
     category: DAF allocation
     deposit $75
    4. Create and memorise an Income and Expenses, Detailed report that reports on all accounts but only the DAF categories. If you run this report for all dates, then the balance of your DAF will appear as a negative total for the DAF deposit category. If you run it for a specific date range, you'll see the net flow in and out of your DAF.
    An ordinary I&E report on all your expenditure for 2021 would now show $100 DAF-TOTAL under expenditure, and for 2022 DAF-TOTAL as zero, which I think correctly reflects your outgoings and your tax position; your account balances would also be reduced by $100 in 2021 and unchanged in 2022.

  5. System closed this discussion on 06 Apr, 2022 05:00 PM.

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