Accredited Wealth Management Advisor Practice Exam

Which fund allows for privacy in donor identities while maximizing tax benefits?

1. Private foundation

2. Both have equal privacy

3. Donor-advised fund

4. Neither fund menances privacy

The correct answer is: Donor-advised fund

Donor-advised funds provide a unique advantage when it comes to privacy for donor identities while also maximizing tax benefits. When contributors donate to a donor-advised fund, they can receive immediate tax deductions while retaining the ability to recommend how the funds are distributed over time. This allows donors to maintain a level of anonymity, as their names and contributions are not publicly disclosed when grants are made from the fund. In contrast, private foundations typically have more stringent reporting requirements, which often lead to public disclosure of donor information and the amounts given. While private foundations do offer some tax benefits, they do not provide the same level of privacy that donor-advised funds do. The distinction between these two fund types highlights the specific characteristics that donor-advised funds offer, particularly appealing to individuals who prioritize both privacy and maximizing their tax efficiency.