More On Tax Planningfrom The Advisor's Professional Library
- Selected Provisions of the American Taxpayer Relief Act of 2012 The experts of Tax Facts have produced this comprehensive analysis of selected provisions of the American Taxpayer Relief Act of 2012 (the Act) to provide the most up-to-date information to our subscribers. This supplement analyzes important changes to the tax code with emphasis on how these developments impact Tax Facts’ major areas of focus: Employee Benefits, Insurance, and Investments.
- Annuities: Variable Annuities Annuities are hot. The tax rules vary with the circumstances. Advisors must be aware of these intricacies when discussing annuities with clients.
That's just one trend noted by Fidelity Charitable Gift Fund's President, Sarah Libbey, in a May 14 interview with Wealth Manager. In 2008, Gift Fund "took in $1 billion and also granted out $1 billion," Libbey says, adding that the fund made its two-millionth grant out to a charity in December 2008. "Granting out a billion dollars in an economy like we have," really demonstrates "the value of the donor-advised-fund [DAF]."
"Women are really in the driver's seat," Libby asserts, "when you think about who is making those decisions about either engaging in tax strategies but more importantly, giving strategies for the household." Women also are more interested in making charitable giving a family goal, "engaging children," in their family giving. One interesting finding of the study is that although when Gift Fund DAFs are opened 80% of primary donors are men and 20% are women, it is women who are calling in to find out "how to do the best research on a charity that they want to grant out to," or about features they'd like to see added.
"High-income women," with, for the purposes of this survey "an annual household income of $150,000 or more" are more likely than high-income men (16% vs. 10%) to use a DAF, "charitable remainder trust, or private foundation." And 7% of high-income women are likely to fund their accounts with securities, compared with 3% of high-income men. In difficult economic circumstances, high-income women tend to give more to charitable causes (35%) "because the need is greater," than high-income men (25%).
Of all survey participants, 44% report that they have a "dedicated financial advisor, prompting Libbey to observe: "Advisors still need to be more comfortable with tax and giving strategies so that they can be more comfortable in bringing that up," with clients--and she notes that Gift Fund has an option ion which an investment advisor can continue to manage the assets that have been donated into a Gift Fund DAF account--eliminating the issue of losing that part of their AUM.
Gift Fund has $3.6 billion in assets ready for granting out as directed by account holders. A common misunderstanding when it comes to DAFs is that the donor-account holder doesn't really get to pick the charitable organizations where they want the gifts from their account go. That's not so, Libbey explains--most gifts to 501c3 or equivalent charitable organizations will go right through as directed. Gift Fund gets a feed from the IRS to keep up with organizations achieving 501c3 status but not all charities must register with the IRS as charities--some religious organizations, for instance don't have to. Organizations that aren't 501c3-registered--if not already on Gift Fund's list--can be added to the green-lighted list once it's established that they meet the criteria for a charitable organization, such as tax-exempt status. Gift Fund also gets a feed from Lexis-Nexis that can flag an organization that has been involved in a scandal or other legal issue--putting that organization on a watch list, with the grant "pended" until the organization's issues have been investigated. That screening and other research can be very helpful to donors who are looking into which charities they want to gift to.
Libbey notes that there's a also a trend in these tighter economic times for smaller private foundations to convert to donor-advised-funds, in part because they "can potentially save up to 20% of their costs" of running a private foundation, "by using the donor-advised-fund structure instead." The reasoning is sound: "If they reduce those costs they have more dollars going to charity," says Libbey. And isn't that the real bottom line here?