Observations

Looking Out for Your Financial Future

12 - Nov 2019

It’s That Time of Year: Why You Should Make Charitable Gifts Through a Donor Advised Fund

You don’t have to visit your local retail store to see that the holiday season is coming. You’ve probably already begun getting both online and direct mail solicitations from nonprofit organizations eager for your year-end support.

One way to make charitable giving easier and smarter is to set up a Donor Advised Fund (DAF) for Charitable Giving. Your Telarray advisor can help you do this, though it’s best to move quickly this time of year, due to high demand.

What is a Donor Advised Fund?

A Donor Advised Fund is set up as a 501(c)3 organization, and operates like an investment account. Instead of making charitable contributions directly to an organization, individuals make donations to the Donor Advised Fund for Charitable Giving directly. The contributions become the assets of the Donor Advised Fund (DAF). The account holders then direct donations, in the form of grant checks, from the DAF to the charities the account holders want to support. 

Saving you taxes is the biggest advantage to using a Donor Advised Fund for Charitable giving. Since contributions to the DAF become the property of the Charitable Fund itself, the amounts donated to the DAF become eligible for a tax deduction when the deposit to the DAF occurs.  The funds in the DAF are invested until the account holder makes grant requests to donate amounts to specific charities. Account holders can make significant bequests without burdening the charities with the need to make investment decisions.  Account holders can set up one-time or recurring grants to fund the 501(c)3 organization(s) of choice.

More Tax Advantages with a Donor Advised Fund.

DAF’s are flexible allowing account holders to donate appreciated, unrestricted publicly traded securities (i.e., stocks, exchange-traded funds (ETFs), mutual fund shares, and bonds).  This process allows the account holder to take a deduction for the full appreciated value of the stock without triggering capital gains or income tax. This benefit also increases the funds available to grant because funds are not reduced as the result of income taxes.

The DAF has a minimum initial contribution requirement of $5,000. However, the initial deposit to the DAF can be an amount totaling multiple years of someone’s planned giving. “Bunching” multiple years of anticipated charitable donations into one deposit to a DAF account may help you use the itemized dedication option on your annual tax return instead of taking the standard deduction. 

Grant requests are made directly to the DAF, which reviews and processes recommendations.  Grant recommendations are usually approved if the receiving organizations are IRS-approved 501(c)3 public charities and comply with some guidelines and restrictions.  Grants can be made for as little as $50 and can be set up as one-time or recurring gifts.

If giving through a Donor Advised Fund sounds like a good strategy for you, call your Telarray advisor today.

Rob Dingler, CPA, PFS

Author:

Rob Dingler has nearly 30 years of experience in investment management, financial planning, accounting and auditing. He is a CPA and is licensed as a Personal Financial Specialist (PFS).

He joined Telarray (then FSG Financial Management) in 2005 and serves on the firm’s Investment Committee. He has been named multiple times as one of Memphis Magazine’s 5-Star Wealth Managers and has spoken at national conferences for registered investment advisors.

He earned an undergraduate degree from Harding University in Business Administration in Marketing and a Masters in Accounting from the University of Memphis.

He has developed a seminar on investing based on Biblical principles and regularly volunteers to counsel families and individuals about financial planning. Dingler is a board member of the Midsouth Greyhound Adoption Option.