5 Ways a Donor Advised Fund Can Help Your Clients Achieve Year-End Goals

The end of the year is a busy time for many of us. During this traditional season of giving, The Minneapolis Foundation always has plenty to do helping our donors use their charitable funds to make holiday gifts to the causes they care about. It’s also crunch time for our partners in the financial services industry, many of whom come to us for support as they help philanthropic clients wrap up tax-related business by year’s end. Whether you’re a CPA, a tax attorney, or a financial planner, we get it: The clock is ticking down to December 31.

My colleagues and I are experienced at teaming up with financial advisors to help their clients take advantage of charitable strategies that are both meaningful and tax-wise. In particular, setting up a Donor Advised Fund can be an efficient way to help your clients accomplish both philanthropic and tax goals. With one year-end gift to a Donor Advised Fund, clients can receive an immediate tax benefit, while retaining the flexibility to support the causes they care about over several years, the rest of their lives, or even multiple generations.

Here are five kinds of clients who might benefit from establishing a Donor Advised Fund before the end of the year:

  1. The client who had a large taxable event this year
    Do you have clients who sold a business, hold highly appreciated stock, or received a large inheritance this year? Helping your clients maximize their charitable deductions by making a gift to a Donor Advised Fund can be a simple way to partially (or fully!) offset an unusually large tax liability.
  2. The client who makes cash donations to nonprofits—but who could be gifting highly appreciated securities instead
    Many people automatically reach for their checkbooks when they want to make a donation to charity. Your clients may not know it, but they can often reap greater tax savings by gifting non-cash assets such as highly appreciated securities. The trick is that many nonprofit organizations don’t have experience accepting stock and other non-traditional gifts… but a Donor Advised Fund does. Establishing a Donor Advised Fund at a community foundation makes it easy and convenient for your clients to make a gift of appreciated securities, which they can then use to support the organizations they care about.
  3. The client who is a trustee of, or advises on, distributions from a charitable lead trust, but who struggles to identify nonprofit organizations to support with those funds
    Choosing charitable recipients can be a daunting task. What’s the best way to make a difference in the world? Of all the causes you care about, which do you most want to support? These are not easy questions. A Philanthropic Advisor can help your client set, clarify, and achieve goals for their giving. My colleagues and I are knowledgeable about community issues and nonprofit organizations, and we’re experienced at helping generous individuals, families, and businesses choose from seemingly limitless options to develop giving plans that fit like a glove. For any client who could use help setting goals or identifying charities to support, establishing a Donor Advised Fund is a great first step toward developing a philanthropic plan that does good and feels good.
  4. The client who got a year-end bonus
    Charitable clients who desire to minimize the tax liability from their year-end bonus may want to consider opening a Donor Advised Fund. Because there is no required timeline for distribution of charitable assets from a Donor Advised Fund, opening a fund can be a great option for clients who wish to receive an immediate tax benefit while retaining the ability to take their time and do their due diligence before selecting charitable recipients.
  5. The client who loves giving gifts of stock (to 11 different organizations)
    As many financial advisors can tell you, processing a gift of stock involves a fair amount of paperwork and coordination with nonprofits and their financial advisors. If you have clients who understand the advantages of gifting stock to charity, more power to them! Let them know that they can streamline the process by establishing a Donor Advised Fund. Gifting stock to Donor Advised Funds is simple—and once the gift is in the fund, it’s easy to divide it among many charitable recipients. This approach also separates the tax-deductibility event from the ultimate support of the nonprofit organizations.

Do you have clients who fit any of these descriptions? Contact a Philanthropic Advisor today at 612-672-3878 to discuss how we can best partner to support your clients’ year-end needs.

You might also like: