Donor Advised Funds – The Perfect Giving Vehicle

By Robert on February 23, 2018 in Announcement, Uncategorized,

Like most nonprofits, RJF receives a lot of donations in December each year. This past December was different, though. The phone was ringing off the hook after The Tax Cut and Jobs Act became law resulting in many more donations than usual.

In 2017, $3.7 million was donated to RJF with one-third of that amount donated in December. Many of our generous donors poured money into their donor-advised funds (DAFs), which allows for immediate tax deductions but gradual distributions to nonprofits and synagogues. These charitable giving vehicles are easy to create and provide tremendous flexibility.

RJF currently manages 78 DAFs. Ten new DAFs were created in 2017 alone. DAF donors recommended donations of $1.8 million to charities here in Richmond, the U.S. and around the world. Over half of our 2017 grants came from recommendations from our DAF donors.

The aim of many of our donors in December was to donate before the end of the calendar year, when, for tax purposes, giving became less advantageous for many households. Beginning in 2018 the standard deduction will nearly double to $24,000 for a married couple and the state-and-local-tax deduction will be limited to $10,000. More donors will claim the standard deduction and fewer will get a direct benefit for their charitable contributions. According to the Tax Policy Center about 11 percent of households are projected to itemize deductions, down from 26 percent under prior law.

Donors now have more reason to concentrate giving in certain years.  DAFs can serve as a great charitable option to manage their generous philanthropy.

We work with a host of professional advisors, including certified public accountants, wealth advisors, and estate planning attorneys. Upon their advice, many donors decided to donate several years’ worth of donations in 2017, before the higher standard deduction and lower tax rates took effect. Such bunching of donations could now become a common charitable practice because donors would concentrate donations to exceed the standard deduction every other year or so.

Gail and Jim Plotkin created a DAF in 2017. They also set up other planned gifts for the community as part of the Life & Legacy program.

“We had identified several potential projects at certain schools, agencies, and Synagogues we were already supporting that would benefit from additional funding in 2018, and wondered how we might provide for their future needs as well. We explored several philanthropic institutions, but things did not come together until we called Robert Nomberg.”

Jim continued, “He was a good and patient listener and an astute and knowledgeable resource. He helped us design a DAF that accomplished our current objectives in a creative and tax-advantaged way, with flexibility to make future contributions to our DAF or to make other donations as needs emerge and circumstances permit. He had all the answers,” Jim said.

The economy’s continued improvement helped fuel the stock market’s rise in 2017 while boosting the desire to create DAFs for many donors. If you donate appreciated assets like stocks and mutual funds that have appreciated for over a year you receive the added benefit of avoiding the capital gains tax. Donors also receive a deduction against their income taxes for the full value of the assets.

To learn more about DAFs and other tax- advantaged ways of donating, please contact your professional advisor or call the RJF office.