The global pandemic and ensuing economic slump have put clients in one of two camps: the newly unemployed who need coaching, and those who are on financially solid ground and want to give back. For the latter group, donor advised funds (DAFs) are hands-down the most efficient way to give.
A DAF is a charitable giving structure in which donations of cash or property are deductible in the year in which they are made. The proceeds are typically invested among a selection of mutual funds with minimal fees. Your clients can put their money to work through nondeductible grants to qualified charities whenever they choose.
Unbeatable Tax Advantages
With a DAF, clients can deduct the full value of the donated securities and/or property in year one and avoid having to pay capital gains tax on appreciated assets. The money in their DAF grows tax free indefinitely.
Daniel Kramer of Kramer Financial Group in New York City describes the appeal of DAFs for tax management.
“Several of my clients use a ‘bunching’ strategy where they put two or three years’ worth of charitable gifts into one year, and then give out of that over the next few years while taking their standardized deduction,” explains Kramer.