Donor Advised Fund

The Donor Advised Fund and other charitable donations are a great way to reduce the tax liability of a household.

The IRS imposes numerous rules covering charitable tax deductions. An often misunderstood notion is that all of one’s charitable donations will be deductible. Based on the tax year, this isn’t always the case due to the standard deduction. For example, if a family gives $1,000 to their church, but uses the standard deduction on their tax return, the donation to the church won’t improve their tax return. The taxpayer needs to be eligible to itemize on their tax return in order to surpass the standard deduction available to all taxpayers.

Enter the Donor Advised Fund

The Donor Advised Fund is a charitable giving account that allows a taxpayer to front-load, i.e. combine multiple years of planned charitable donations into a single tax year. Why? To group the amount of the charitable gift to exceed the standard deduction and take full advantage of their charitable giving strategy on their tax return. The Donor Advised Fund is, itself, established as a public charity and the gift to it accomplishes this goal. Grantors (the taxpayer gifting to the Donor Advised Fund) can then recommend grants from the charitable giving fund over time.

Donor Advised Funds can be used as a charitable giving account for more than just philanthropic purposes. Subject to IRS imposed limitations¹, one can gift:

• Low cost basis, highly appreciated stock
• Real Estate
• Privately-held stock
• Life Insurance Proceeds
• Retirement assets
• Cryptocurrency
• Restricted Stock Options
• Other asset types as well

Donor Advised Funds (DAF account for short) are also a great way to involve and teach children and other family members about a donor’s charitable giving goals. At Coastal Wealth Advisors, we work with you and your accountant to analyze how a DAF fund would impact your tax liability. From there, we actively assess which of your investment assets make the most sense to donate to the DAF fund. We then set-up the DAF investment and manage the new investment portfolio while you simply sit back and enjoy giving to your favorite qualified charities over the years.

We welcome you to click the button below to see if a Donor Advised Fund makes sense for your family.