November 27, 2017
The end of the year is everyone’s favorite time to make charitable donations. It gives donors one last chance to secure additional tax benefits to offset gains in their portfolio while supporting philanthropic goals in the season of giving. However, the need to mitigate taxes doesn’t always align with when and where you want to donate your assets.
Fortunately, there is a simple philanthropic tool called a Donor Advised Fund (DAF) that can take the pressure off of balancing these financial and philanthropic goals. A DAF is a charitable giving instrument supported by a public charity that makes it possible for donors to make a contribution that qualifies for an immediate tax deduction, and the asset is then reinvested, allowing the donor to make grants over time to any IRS-qualified public charities.
“A DAF is a wonderful tool for giving,” says Mike Penfield, National Director of Charitable Services for U.S. Bank Wealth Management. “It allows donors to secure the tax benefits today while they plan their giving over time.”
It also allows the donor to achieve dual tax benefits: rather than selling a stock that results in a taxable event and then donating the proceeds to one or more charities, donors can donate the asset directly to the DAF, where it continues to appreciate tax-free. This way, they avoid taxes on the sale of the asset while achieving tax benefits from the donation.