Planning for Success: Have you Considered a Donor Advised Fund to Achieve your Philanthropic Goals?

As you contemplate your estate planning and leaving a legacy, you may want to recognize and give to charitable organizations or philanthropic causes that have made an impact on you.  Perhaps, you may want to encourage the beneficiaries of your estate to continue the legacy of charitable giving that you have maintained during your lifetime.  There are several options available to accomplish your charitable giving goals in your estate plan, and a simple and effective solution is with a donor advised fund.    

Over the past decade, nonprofit fundraising has been rapidly transformed by new ways to give.  Donor advised funds are a popular way for donors to support nonprofits of all sizes.  Most people believe donor advised funds to be vehicles that streamline charitable giving during their lifetimes.  While this is certainly true, a donor advised fund can also help ensure that charitable work will continue for future generations.  Essentially, a donor advised fund allows you to establish and fund an account for philanthropic giving by making irrevocable, tax-deductible contributions to a third-party charitable sponsor.  

Donor advised funds offer many tax savings benefits that make them an excellent addition to your estate plan.  Donors receive an immediate tax deduction of up to 30% of adjusted gross income (AGI) for gifts of appreciated securities, mutual funds, real estate, and other assets and can enjoy five-year carry forward deduction on gifts that exceed AGI limits.  Once you make a gift to a donor advised fund, you can distribute the gift to the charity of choice at your own convenience.  It is best to gift appreciated securities since this will allow you and the charity to avoid having to pay taxes on the capital gains that have accumulated over the years.  Therefore, you receive a double tax advantage, and your gift goes further since the charity does not pay taxes on the gift.  This gift effectively allows you to lower your estate’s value; as well as, reduce the future estate tax liability.  If you were to sell the appreciated securities and write a check to the charity instead, you would have to pay capital gains tax; thus, reducing the amount that could have gone to the charity.  Gifting appreciated securities to a donor advised fund, rather than directly to a charity, will also make it easier to spread your contributions to more charities over a longer time horizon. You can make your contribution now, then have an unlimited amount of time to decide which charities to support.   

At Coral Gables Trust, we can utilize Charles Schwab’s donor advised funds, which gives us the ability to swiftly open and facilitate your charitable gifting desire.  A donor advised fund provides a cost-effective solution to achieve your goals and save a considerable amount of time, as opposed to the lengthy process of creating a charitable remainder trust or a foundation.  We can easily quarterback all your charitable giving by consolidating everything in one place.  During tax season, this integration will act as a tremendous time saver since all your documents will be at one place.  

A donor advised fund can play a strategic role in your overall financial plan since it is a tax-efficient way to maximize your gift to charities that are near and dear to you.  They allow you to avoid capital gains, reduce your estate tax liability and preserve the family’s philanthropic endeavors.  We help clients leverage strategies like donor advised funds to accomplish their philanthropic desires.  While charitable giving is just one of many client goals in a comprehensive financial plan, we welcome the opportunity to discuss how your financial plan should be best positioned to achieve all your objectives.