By Maurice Stouse, Financial Advisor and Branch Manager
America and Americans are the most generous on earth. Up until a few years ago, gifts to charities (churches, medical organizations, schools) could be deducted from income at tax filing time. The tax laws changed and many of the tax deductions went down or away with tax reform in 2017. Despite that, Americans continue to donate their hard-earned money and assets to their churches, schools, civic organizations, hospitals and other non-profits. What many folks might not realize is that years ago (over 30 years ago), giving became more convenient and efficient with the innovation or advent of donor advised funds (or DAFs for short). A charitable or nonprofit organization is also known as 501(c)3. Anyone donating to a cause should always confirm that the organization to which they want to give is registered as such. DAFs are also 501(c)3 organizations.
It is suggested that would be donors do a little research upon considering a gift or donation to a charitable organization. A DAF could help simplify that for them. On their own, granters to charity could turn to several sources available online. There are several known choices such as give.org, charitywatch.org or charitynavigator.org. These sites can give you an assessment as well as commentary, if that is available. They even rate or score the organization. Many charitably inclined individuals could benefit from the additional knowledge that can be obtained. Often the DAF will assist the donor when they want to gift out of their fund and have the research available on an organization of choice available to them before they donate.
So, what are ways to give? The straightest is by cash, check, securities (such as stock) or some other asset. Real estate (land or homes or buildings) as well as art and perhaps even businesses. While most people write a check (to their church, for example) or have it auto drafted or even put on a credit card, there are other things/ways for them to consider, which is why we are covering donor advised funds.
Many charitable organizations, and most investment firms, set these up for the ease of giving and the simplicity of administration over time, of their gifts. Donor advised funds are in and of themselves 501(c)3 organizations — public charities. So, once a contribution is made, that is the gift. What is flexible is when the money moves to a church, or school, hospital or other non-profit, from the donor advised fund. That could be done now or in years to come, allowing the gift to potentially grow because it is invested. While the money is in the DAF, it is often invested into mutual funds. The objective and hope are that it grows over time and that can lead to even greater gifts to future charities. The key is to realize that by making the donation now, the gift is made, in this tax year, regardless of when the funds move to a non-profit or charity.
What about the impact on taxes? It is important to reiterate that the tax law changes in 2017 meant that the standard deduction went up substantially, so that a charitable contribution would have to exceed that deduction limit and the tax filer would have to itemize. Nonetheless, it is important to point out that should someone qualify (gifting exceeds standard deduction of $14,600 for single filers and $29,200 for joint filers), they could potentially have a deduction from income: 60% of the value of total cash gifts for the year and 30% of the value of appreciated securities for the year. Some people who have stocks that have appreciated in value contribute that and are not be impacted with the taxable gains. A donor advised fund might also be a useful tool in estate planning as well should someone be looking for ways to lesson the impact of taxes on their estates when they pass on.
To sum it all up, a donor advised fund allows the contributor to advise where grants or gifts go and can appoint a successor donor advisor or a charity of choice to receive any residual at their passing. Most DAFs also use technology to aid the giver; whereas someone could make grants directly from their smart phone while they are on the go.
To learn more, talk to your advisor or go to Raymondjamescharitable.org.
Maurice Stouse is a Financial Advisor and the branch manager of The First Wealth Management/ Raymond James. Main office located at The First Bank, 2000 98 Palms Blvd, Destin, FL 32451. Phone 850.654.8124. Raymond James advisors do not offer tax or legal advice. Please see your tax professionals. Email: Maurice.stouse@raymondjames.com.
Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC, and are not insured by bank insurance, the FDIC, or any other government agency, are not deposits or obligations of the bank, are not guaranteed by the bank, and are subject to risks, including the possible loss of principal. Investment Advisory Services are offered through Raymond James Financial Services Advisors, Inc. The First Wealth Management and The First Bank are not registered broker/dealers and are independent of Raymond James Financial Services.
Views expressed are the current opinion of the author and are subject to change without notice. The information provided is general in nature and is not a complete statement of all information necessary for making an investment decision and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. Raymond James advisors do not provide tax or legal advice. Please see a tax professional for advice specific to your own situation.
Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes. To learn more about the potential risks and benefits of Donor Advised Funds, please contact us. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Investments mentioned may not be suitable for all investors. Every type of investment, including mutual funds, involves risk. Risk refers to the possibility that you will lose money (both principal and any earnings) or fail to make money on an investment. Changing market conditions can create fluctuations in the value of a mutual fund investment. In addition, there are fees and expenses associated with investing in mutual funds that do not usually occur when purchasing individual securities directly. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.
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