Fiduciary Trust Lowers Donor-Advised Fund Minimum
The firm hopes to attract more clients at a time when donors are looking to "bunch" donations for tax reasons.
Fiduciary Trust Charitable, an independent public charity, said Wednesday that it has lowered the minimum amount required to open a donor-advised fund from $250,000 to $50,000 — in anticipation of the heightened interest in “charitable gift bunching” under the new tax law.
“We expect the new federal tax law to increase high-net-worth household interest in ‘charitable gift bunching’ using donor-advised funds,” said Fiduciary Trust Charitable Executive Director Todd Eckler. “By lowering the minimum account opening contribution, more donors working with financial advisors will be able to take advantage of our donor-advised fund offering in general, as well as the ‘bunching’ tax strategy.”
The new $10,000 cap on deductions of state and local income and real estate taxes under the new tax law “could bring the standard deduction into play for high-net-worth households who might never have considered it before,” Fiduciary Trust explains.
The bunching technique, the firm said, “may benefit donors whose noncharitable itemized deductions fall below the new higher standard deduction ($24,000 for persons married filing jointly), so long as the donor has sufficient taxable income to fully deduct several years of charitable contributions in a single year, given deduction limits.”
Bunching involves consolidating tax-deductible charitable contributions that would normally be made over multiple years into a single tax year. “In the consolidated year, the donor contributes to a charitable giving vehicle, such as a donor-advised fund (DAF), and receives an immediate tax deduction through itemizing deductions on his or her federal tax return,” Fiduciary Trust explains.
The donor would then recommend grants from the donor-advised fund to qualified charities over several years, allowing the donor to utilize the now higher standard deduction in those years, the firm said.
Benefits of donor-advised funds include an immediate income-tax deduction in the year a contribution is made, while distributions to IRS-qualified charitable organizations can be made over time based on the donor’s recommendations.
Donor-advised funds can also be funded with assets from taxable accounts, trusts, private foundations and other donor-advised funds.
Other donor-advised fund sponsors, like Fidelity Charitable and Schwab Charitable, have account-openimg minimums as low as $5,000. Fiduciary Trust says it partners with investment advisors to provide donors with a higher level of service.
— Check out Fidelity Charitable Offers Impact Investing Education for Advisors on ThinkAdvisor.