CHARITABLE GIVING

Looking for Tax Relief in 2017? There’s Still Time for Donor Advised Funds

11.07.2017

Donor advised funds can offer powerful tax benefits, especially if you are anticipating capital gains, a large bonus or another significant source of income this year.

But if you want to take advantage of those tax deductions in 2017 now is the time to take action. If you already have a donor advised fund, remember that some types of contributions take longer than others to process. If you don’t have a donor advised fund, there may still be time to set one up before the end of the year.

Avoiding the Pain of Capital Gains

Donors receive an immediate tax deduction when they make a charitable contribution to a donor advised fund—up to 50% of your adjusted gross income for cash and 30% for securities. If those assets have appreciated in value since you acquired them and you have owned them for more than a year, your portfolio manager might recommend contributing them to a donor advised fund so your accountant can deduct the fair market value from your 2017 income taxes and you can avoid capital gains taxes. 

Sudden Wealth? Front-Load Your Fund

One of the most attractive benefits of donor advised funds is the ability to reduce the tax burdens that come along with receiving large sums of income from the sale of a company, inheritance or retirement.

For example, if you typically contribute $10,000 to a charitable organization each year and suddenly receive a windfall, you might be able to front-load a donor advised fund with a higher amount, let's say $100,000. You would be able to take an immediate tax deduction of $100,000 in the current year, and can distribute the funds to charity over any timespan you choose. You can only contribute amounts up to the adjusted gross income limit in any given year, but any excess can be carried forward and deducted for five additional years after the year of the original contribution. 

Donate Now, Choose a Recipient Later

If you aren’t sure which charity you want to support, DAFs offer the additional benefit of giving you plenty of time to decide, because they are not subject to minimum annual distribution requirements. On average, donor advised funds distribute roughly 18% to 22% of their assets to charitable organizations each year. Grants can be awarded in your name, the name of another individual or anonymously.

Is a Donor Advised Fund Right for You?

There are several important caveats associated with DAFs. While the donor enjoys the ability to recommend grant recipients, grant decisions are approved by the organization that sponsors the DAF. If you create a donor advised fund you can also involve your family in your philanthropy efforts by naming one or more of your relatives as successor advisors, giving them authority to make contributions, recommend grants and name other advisors and successor advisors when you pass away. DAFs are irrevocable and carry modest administrative fees.

A Donor Advised Fund Might be Appropriate if You… 

  • Make large gifts to charity each year
  • Own appreciated assets
  • Have concentrated positions in your portfolio
  • Are in a high tax bracket 
  • Aren’t sure which charities to support 
  • Prefer to spread gifts over time  
  • Want to leave a legacy 
  • Are subject to estate taxes 
  • Don’t want to handle administrative responsibilities and recordkeeping

You Can Contribute Assets Such as…

  • Cash
  • Most securities
  • Closely-held businesses
  • Employer stock in a qualified plan
  • ESOP qualified replacement property
  • Personal property (although calculating allowable deductions can be complex)
  • Business and farm equipment
  • 457a repatriated assets 

A Donor Advised Fund is Not Appropriate for… 

  • Generating income for you or your family
  • Transferring wealth to heirs
  • Fundraising
  • Meeting a personal, binding pledge to charity
  • Making quick, one-time gifts to charity

For more information about donor advised funds, including the Fiduciary Trust Charitable Giving Program, please contact your Fiduciary Trust representative or call 877-384-1111.


This communication is intended solely to provide general information. The information and opinions stated are as of November, 2017, and may change without notice. The information and opinions do not represent a complete analysis of every material fact regarding any market, industry, sector or security. Statements of fact have been obtained from sources deemed reliable, but no representation is made as to their completeness or accuracy. The opinions expressed are not intended as individual investment, tax or estate planning advice or as a recommendation of any particular security, strategy or investment product. Please consult your personal advisor to determine whether this information may be appropriate for you. This information is provided solely for insight into our general management philosophy and process.Historical performance does not guarantee future results and results may differ over future time periods.

IRS Circular 230 Notice: Pursuant to relevant U.S. Treasury regulations, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. You should seek advice based on your particular circumstances from your tax advisor.

CHARITABLE GIVING

Six Strategies for Tax-Effective Charitable Giving

11.08.2017 Bryan Kirk

NEXT POST

CHARITABLE GIVING

Charitable Giving Best Practices: Planning Makes a Difference

11.01.2017 Gerard F. Joyce

PREVIOUS POST