A Few of the Finer Things - May 2016
Q: What does your money become when you combine "The" and "IRS"?
A: THEIRS
Most will get a chuckle out of that little joke…while April 15th is in the rear-view mirror it is still a good time to think about tax strategies that can help you throughout the year. One such strategy is a Donor Advised Fund (DAF). With a DAF, you can retain a strong influence on how your charitable gifts are used, and it frees you from the significant costs and time that may be associated with a private foundation.
One of the greatest benefits of a DAF is the ability to efficiently transfer appreciated securities at their fair market value.
Tax related benefits include:
- When making donations using appreciated assets held longer than one year, you avoid any capital gains taxes that would be associated with an actual sale versus the transfer into a DAF.
- You can reduce future tax burden for heirs by making a DAF a beneficiary of your IRA or annuity. Essentially, assets are removed from estate and gift tax consideration, offering tremendous tax advantages.
- You have the flexibility to reduce tax bills by making a donation to the DAF in the same tax year.
Basically, a deduction for a donation to a DAF is taken in the same year as the contribution to the fund, rather than the year of the distribution from the fund to a charitable organization. This benefits individuals who have spikes in income, are selling a business or are receiving an inheritance with taxable implications.
As often as financially possible, I try to "eat what I cook" as far as personally investing in or using the products and services that I recommend. "The Debbie Berkowitz and Gary Weiss Family Foundation" DAF is an integral part of our financial life-it has served as a way for us to reduce our income taxes, efficiently (and mind-blowingly easily) give to charitable causes that we want to support, as well as served as a tool to educate our children about being philanthropic for their future. I am quite certain that my clients who have a DAF will sing the praises as well.
The article linked is a reprint from a previous Finer Things post, but it remains as timely as ever.
- Gary Weiss, May 2016
