Going Deeper with Donor Advised Funds

For years, Wealth Impact Partners has championed intentional giving among the clients we serve. It’s our privilege to help clients create Life & Legacy plans that include gifts to the people, causes, and organizations that matter most to them. These gifts many times exceed what people previously thought possible and most are both surprised and grateful when they discover the resulting freedom to be more generous.

For some time now, we’ve been recommending a giving strategy that is becoming increasingly popular – the creation of a Donor Advised Fund (DAF). In fact, contributions to DAFs now represent seven percent of all individual charitable donations in the US and in 2013, assets in DAFs rose to $53.7 billion nationwide.

A DAF is a charitable giving vehicle that allows donors to direct cash, stock, and other appreciated assets into a fund that is managed by a public charity, such as a community foundation.  The assets become available as cash and donors can then recommend whatever gifts they want to make to their chosen charitable causes or nonprofit organizations. The fund manager takes care of all the details, preserving the privacy of the actual donors.

A DAF can streamline giving and, because donors can direct many non-cash assets to the DAF, it makes it easier to convert these types of resources into the cash gifts most needed by charitable organizations and bypass any related capital gains tax in the process. Because there is no distribution requirement for DAFs, donors can establish one without specific charitable beneficiaries in mind and later determine which organizations best match their values.

Establishing a DAF is a simple process, similar to opening a bank account, and the charitable deduction for tax purposes is available in the same tax year that the money or assets are deposited into the DAF.

Unlike a private foundation, DAFs do not solicit requests for funding, so charitable organizations are unable to identify them and seek funds directly from the DAF and its donors. However, charities can develop ways to ascertain which of their donors have established a DAF and plan contacts and communications to ensure they will be considered by these donors.

In my mind, the beauty of a DAF is the intentionality and depth that it brings to giving. By establishing a specific pool of charitable funds, donors are making a commitment to give – and these gifts are often larger than those that are written from the family checkbook in an ad hoc fashion.

We’re so persuaded that DAFs are a great giving vehicle that Wealth Impact Partners recently established our very own DAF, which we intend to fund annually with a percentage of the company’s profits. Our “Wealth Impact Community Care Fund” is managed by the Renaissance Charitable Foundation. Other great DAF managers are the Combined Jewish Philanthropies, National Christian Foundation, and Schwab Charitable.

As we begin a new year, it’s an opportune time to reflect and go deeper if the giving we do – or hope to do – this year will be as meaningful and impactful as we want it to be. If you think creating a DAF could help you better achieve your giving goals, this is something you should explore. Please don’t hesitate to contact us if you have questions or want assistance. We’d be honored to help.

Peace,

Ron Ware

The information presented here is meant to be educational and should not be considered tax advice. Please consult your qualified tax advisor or attorney before implementing any idea discussed. 

Disclosures:

The material contained herein is for informational purposes only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular investment objectives, financial situation or needs of individual investors. Any tax advice contained herein is of a general nature and is not intended for public dissemination. Further, you should seek specific tax advice from your tax professional before pursuing any idea contemplated herein. This advice is being provided solely as an incidental service to our business as insurance professionals and investment advisors.

Neither Wealth Impact Partners, Valmark Securities nor its affiliates and/or its employees/agents/registered representatives offer legal or tax advice. Please seek independent advice, specific to your situation, from a qualified legal/tax professional.

Securities offered through Valmark Securities, Inc. Member FINRA/SIPC. Investment advisory services offered through Valmark Advisers, Inc., a SEC Registered Investment Advisor. 130 Springside Drive, Suite 300 Akron, Ohio 44333. (800) 765-5201. Wealth Impact Partners is a separate entity from Valmark Securities, Inc. and Valmark Advisers, Inc. BSW Inner Circle and AES Nation LLC are separate entities from Valmark Securities and Valmark Advisors.