What Are The Latest In Holiday Giving Trends?
One Wealth Advisors, David Steele explains in a discussion with Dynasty Financial Partners Sally Cates
As clients consider holiday giving, San Francisco-based Wealth Manager David Steele of One Wealth
Advisors, advises them against setting up costly family foundations and instead recommends that
families use Donor Advised Funds. He explains that, by using DAFs, the donor receives a tax deduction, as they would if giving directly to a charity, but they can also potentially avoid some capital gains tax as well. It is with this second benefit in mind that he encourages entrepreneurs to donate low basis stock to Donor Advised Funds instead of donating cash – the double benefit of avoiding capital gains tax on shares they would otherwise have to pay once sold, along with the full deduction they get of the amount donated against their income tax, can create a scenario where the donor is effectively only giving up 25% or less of the “utility” of the amount donated.
There are also logistical advantages to “de-coupling” the tax deduction process and the grant giving process. When donors
give to charities directly, they have to account for each and every gift when it comes to tax planning. If they instead gave the full amount of their expected giving throughout the year, just once a year to a Donor Advised Fund, they only have one transaction to account for in terms of deductions. From that point forward, each grant made to the ultimate charities are not a tax consideration. Also, without using a DAF, donating small amounts of stock, as highlighted in the previous paragraph, directly to each charity can be cumbersome – if not impossible. Lastly, by using Donor Advised Funds, the donor can assure that each charity is a legitimate 501c3 organization as the administrator of the DAF typically is charged with confirming this, not the donor.