When Peggy and Stephen Goulding sold their Wenona, Ill., commercial- baking company this year, they decided they wanted to set aside a large sum to give to charity.
For years, they had been writing individual checks to charitable organizations they thought were helping community or global needs, such as Doctors Without Borders or a group that helps the elderly with housing opportunities and maintenance.
But with the larger commitment to give, the couple didn't know immediately where they would want to donate all the funds. They wanted to take time to think about what they most value and seriously evaluate the organizations that might receive their money. Peggy Goulding, 62, said she has second-guessed past donations when she heard that "the head of the organization was living in a mansion, or 60 percent was going to administration."
So they turned to a donor-advised fund, which they set up at the financial-services firm Northern Trust.
Donor-advised funds have become popular in recent years because they allow people with charitable intentions to set aside money easily and solidify a major tax deduction in a single year. Then they can take their time - months or years - to decide where to give the money and how much to give each organization that appeals to them.
Some donor-advised funds can be started with as little as $1,000, which is less than the $2,974 sum given by the average American household to charities last year, according to National Philanthropic Trust data.
The funds have been gaining popularity throughout the decade, but this year some financial advisers are suggesting them with a greater sense of urgency because of possible federal tax changes next year. President-elect Donald Trump and congressional Republicans have talked about changes that include cutting back tax deductions while lowering tax rates.
Although the outcome of the tax debate is far from certain, advisers are telling clients that a major contribution to charity this year will count more than in the future if charitable-donation tax rules change.
It's important to remember that donor-advised funds should never be used simply for tax reasons. They are designed for people who want to give, and once money is in a fund and the tax deduction taken, you can't change your mind and use the money for anything other than giving to charitable organizations recognized by the IRS.
Those starting donor-advised funds at Northern Trust must begin with at least $50,000. But during the last decade, companies such as Fidelity, Vanguard, and Charles Schwab have made the funds accessible to less affluent donors. At Fidelity, the minimum requirement is just $5,000.
Typically, securities such as stocks or mutual-fund shares can be used instead of cash. That allows you to contribute an investment that's gone up greatly in value without having to sell it and take a capital gain.
There were 269,180 donor-advised funds last year, almost twice as many as existed just five years earlier. Some are offered directly by charitable organizations for a single cause, others are through community foundations, and fast growth is occurring at those offered by mutual-fund and financial-services companies.
Peggy Goulding likes the fact that the money in her fund will be invested, and therefore should grow and allow her to make more contributions over time than she would have if she simply wrote checks. In donor-advised funds, the investment gains are not taxed, and charitable organizations get contributions that aren't taxed.
Goulding plans to give charitable donations from her fund over the next 10 to 20 years and will add new contributions to the fund in future years. If current tax laws stay intact, she will get a new charitable tax deduction for any year in which she adds a new contribution to her fund.
One attraction, she said, is the ability to think carefully about which organizations will get her money. Though there are websites such as www.charitynavigator.org to check on a charitable organization before giving to it, she said she now is going to invest a lot of time visiting organizations that interest her.
She said she is particularly interested in giving to organizations involved with mental health because "it's very underfunded and very underserved."