Point View WealthPoints

Financially Savvy Charitable Giving: Donor-Advised Funds

658e7c6124295ee00d7f_7fdcefb5d0c510aebd8f_Elaine_Phipps.jpg
Elaine F. Phipps, MBA, CFA, is Portfolio Manager at Point View Wealth Management.
31001126d6eea406ce8a_PVWMLOGO.jpg
658e7c6124295ee00d7f_7fdcefb5d0c510aebd8f_Elaine_Phipps.jpg

Americans are known to be philanthropic, with an estimated 83% donating to charitable causes. Making the donation convenient and tax-effective is a win-win for both charities and those with a generous heart. Donor-advised funds (DAFs) are a simplistic funding structure available to those with both small and large charitable giving pots.  

Mechanics of Donor Funds

DAFs can be set up through your investment advisor or a major brokerage firm. The donor transfers securities to a DAF, and is able to receive a tax deduction immediately for the current market value. There is no need to sell the securities first, and the donor does not pay the capital gains tax on the appreciated component of the securities. The donor then chooses from a menu of mutual fund offerings for investment of the proceeds, allowing tax-free growth until the time an allocation to a specific charity is made. If a donor fails to distribute them during his lifetime, he can pass that ability on to his heirs.

Sign Up for E-News

Pros of Donor Funds

Immediate tax deduction, but flexibility on the payout – The DAF allows you to bank your charitable giving going forward. You can donate a large amount, take the tax deduction immediately, then give away pieces of that donated pie according to your own timetable to as many charities as you would like.  

Offers small investors an option historically only afforded to private foundations – Private foundations are typically set up for high net worth individuals. These funds are required to pay out 5% of their assets each year, and have high legal setup and ongoing maintenance costs. They also have less attractive deduction rates than DAFs.   

Ability to donate less liquid assets – DAFs, unlike most charities, will accept illiquid gifts, such as art, land or private and restricted securities. Some even take Bitcoin. The DAF firm will try and sell the asset and credit the funds to the donors account.

Funds continue to grow – Even though the donor cedes control of the assets, he chooses from various investment vehicles for the amount of the proceeds. This allows the funds to grow tax free and, hopefully, increases the amount you can give to charity down the road.  

Cons of Donor Funds

The rapid growth in DAFs has not been equally matched by DAF grants to charities – Apparently investors love the thought of giving to charity when there is a tax deduction, but are less philanthropic when it comes to actually giving the money away Statistics provided by the largest DAF firms suggest payout rates are falling, from about 20% in 2008 to the low to mid-teen rate in 2014. So if you do contribute to a DAF, keep in mind the charity who is counting on your money to do good things. You need to remember to authorize that payment to the charity.

You cede control of assets – In theory you may have liked the timing of your Apple (AAPL) stock donation at the time you made it, but should the stock rally you may have seller’s remorse. Some may prefer to pick the stock they donate at the actual time they want to make a charitable gift, thereby avoiding looking in the rear view mirror.  

You may not like fund choices – Just like a 529 plan, you are limited to whatever options your fund manager offers. You may find the funds too aggressive, too conservative, or just sub-par in their historic returns. Do your homework and evaluate the preselected options of funds before you decide where to set up your DAF.

Charitable giving is an American tradition. Finding ways to incent donors to give more in a tax-efficient manner benefits both charities and investors. With the stock market at an all-time high, many investors are sitting on substantial capital gains in their accounts. DAFs are an attractive and timely option to consider.

To read the full article, visit ptview.com/articles/2018.

Note: Elaine Phipps, MBA, CFA, is a Portfolio Manager at Point View Wealth Management, Inc., a registered investment advisor at 382 Springfield Ave., Summit.

For nearly 25 years, Point View Wealth Management, Inc. has been working with families in Summit and beyond, providing customized portfolio management services and comprehensive financial planning, to develop and achieve their financial goals.  Click here to contact David DietzeJohn PetridesClaire TothDonna St.Amant, and Elaine Phipps, or call 908-598-1717 to learn more about Point View Wealth Management, Inc. and how we can help you and your family meet your financial objectives. To sign up for our complementary commentaries and newsletters, e-mail us at firm@ptview.com.

CNBC has named Point View one of the Top 100 fee-only wealth managers in America.

 

The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer.

TAP Into Another Town's News:

You May Also Be Interested In

Sign Up for E-News

Summit

Upcoming Events

Carousel_image_f60df90c75b5ed5345d7_3166a17632a304b3c176_seeing_eye_dog

Mon, April 23, 7:00 PM

Summit Free Public Library, Summit

Grades K-5: Books and Woofs

Arts & Entertainment Education

Carousel_image_7be61d8c0218a63463d0_4f185ba72d5296e67c72_adobestock_74413077_mother_goose

Tue, April 24, 10:00 AM

Summit Free Public Library, Summit

Ages 6 mo.-2 yrs.: Mother Goose Mornings

Arts & Entertainment Education

Carousel_image_c59277305d03a4dae3a5_4164c2471f3c198c0cc5_storytime_0317

Tue, April 24, 10:00 AM

Summit Free Public Library, Summit

Mother Goose Mornings

Arts & Entertainment Education

Summit Fire Department Blotter

02/01/2018, 7:26 am - FD dispatched to Route 78 East Bound mile marker 47.2 for a reported motor vehicle accident with entrapment and injuries. On arrival both the Springfield and Summit Fire Departments set up for extrication. The vehicle was chocked to stabilize the vehicle. EMS performed patient care. A hose line was stretched for possible fire suppression by the Berkeley Heights FD.

Summit Police Blotter

April 11, 2018

3/13 - Jayhee Cho, 32, of Summit was arrested and charged with criminal mischief. Mr. Cho was processed and released with a pending court date.

3/13 - Aseyefigh K. Papanye, 30, of Brooklyn, New York was arrested and charged with theft of credit cards, fraudulent use of credit cards, theft by deception, theft by unlawful taking, obstruction of the administration of the law, and possession of ...

Video: Point View's Petrides Talks AMEX, GE and Amazon Earnings, Stock Outlook

April 22, 2018

Point View Wealth Management's Managing Director and Portfolio Manager, John Petrides, live on FOX Business AM discussing several upcoming pivotal earnings and possible market reactions:

ptview.com/medias/tv-radio

​​​​For nearly 25 years, Point View Wealth Management, Inc. has been working with families in Summit and beyond, providing customized portfolio management ...

Class Act Performing Arts Studio presents 'Sweeney Todd: The Demon Barber of Fleet Street' at SOPAC

Class Act Performing Arts Studio’s senior Musical Theatre Company members will perform “Sweeney Todd: The Demon Barber of Fleet Street” on Thursday, May 10 , through Sunday, May 13, at the South Orange Performing Arts Center.

Set in 19th-century London, this thrilling musical tells the story of barber Benjamin Barker, now known by his alias, Sweeney Todd, and ...

Fear of Rising Rates? Remember The Reason You Own Bonds

If the current interest environment has you concerned about your bond portfolio, remember why you are investing in bonds.  The role bonds, or fixed income, play in a portfolio is not solely based on performance.  Bonds are used to offer stability, particularly when stock market volatility is rising. Rate hikes can dampen bond performance, but keep perspective on how rising rates impact ...

Cluelessly Clueless

I teenaged my way through high school under the assumption that my parents had no idea what I was doing.  I like to think I was pretty good at withholding information and presenting situations in ways that were other than they really were.

 

Still, sometimes they found things out.  Like the time my friends plopped me on our front door step at one o'clock in the morning ...

Practice for the PARCC @ Your Library

Students in Grades 3 and up who live in Summit can practice the Math and Language Arts skills that they learned in school and prepare for the upcoming PARCC exam using the Summit Free Public Library’s FREE subscriptions to Lumos Step Up and Learning Express.  

To access Lumos Step Up and Learning Express, visit the library’s website:  www.summitlibrary.org.

Mouse-over ...