Tax Relief and Giving Your Way The Donor Advised Fund

Presented by:

Scott Talbot, CFP®, CAP®

Director of Planned Giving The Great Commission Foundation

&

Michael Occhipinti, MBT Gift Planning Advisor Wycliffe Foundation

Tax Relief and Giving Your Way The Donor Advised Fund

Find all our prior webinar videos here:

www.jesusfilm.org/donate/planned-giving/pg-webinars

Tax Relief and Giving Your Way The Donor Advised Fund

Presented by:

Scott Talbot, CFP®, CAP®

Director of Planned Giving The Great Commission Foundation

&

Michael Occhipinti, MBT Gift Planning Advisor Wycliffe Foundation

Private Foundation Background

What a DAF is and How It Works

Benefits of a DAF

Who Should Consider DAF

Case Studies

How to Set Up a DAF

Questions

What We Will Cover

• What are they?

• How do they work?

• Why do people create them?

• Benefits and Drawbacks of Private Foundations

Enter the Donor Advised Fund…

Private Foundations

Charitable giving fund that is a separately administered fund by a public non-profit charity into which donors make irrevocable, tax-deductible contributions and from which they make grants to various charities.

First pioneered in 1931

Works like a Private Foundation

Gaining popularity

Fastest-growing charitable giving vehicle in the U.S.

More than 200,000 DAF’s holding $45 billion

$13.7 billion contributed to DAFs in 2012!

DAF: What is it?

Jones

Donor Advised Fund

2

3

4

1

1. Open account

2. Gift cash or assets

3. Receive tax deduction

4. Grant gifts

How does a Donor Advised Fund Work?

Private Foundation Donor Advised Fund

AGI % Limit Cash 30% 50%

AGI % Limit Stock, Asset 20% 30%

Valuation Pvt Stock, RE Cost Basis Fair Market Value

Excise Tax Investment Income

YES – 1% to 2% NO

Self-Dealing Rules YES NO

Business Holdings Restrictions

YES NO

Separate Tax Return YES NO

Tax Returns Open to Public YES NO

Time Required to Establish Weeks or Months One Day

Startup Costs Substantial Fees ($Thousands) None

Privacy NO YES

Administration Significant Handled by Charity

Board Required Not Required

Minimum Contribution $5MM Recommended $5k to $10k

PF vs. DAF

Tax Management Tool

Anonymous Giving Tool

Large Gifts to Multiple Ministries

Estate Bequest Tool

Family Legacy Tool

Applications

Tax Management Tool

Sam Sorenson

Closed a deal that put his income well above his lifestyle needs

Needed income tax deductions

Very involved in giving to a number of charities

Wanted to make a meaningful gift to one or more

However… he needed time to meet with the charities to discuss and consider projects.

Solution: Established the “Sorenson Giving Fund” using a DAF. Contributed some of his additional income to the fund. This allowed him a tax deduction for the current year and… Time and flexibility needed to make wise stewardship decisions.

Tax Management Tool

Tax Management Tool

Paul and Linda Anderson are just a few years away from retirement. Paul is in sales, and he has received several large bonuses over the last few years based on his stellar sales record. Their income, especially with Paul's bonuses, puts them in a high tax bracket. It also provides them with extra money that they would like to use, in part, for investing in several worthy ministries. They realize that their income will drop significantly when they retire and, as a result, their discretionary income will decrease. They will also be in a lower tax bracket, which means their deductions will be worth less in terms of tax savings.

Solution: Paul and Linda decided to ramp up their giving for the remaining years before retirement and contribute most of this to their Donor Advised Fund. Because they are in a high tax bracket now, they want to take the deductions while they're more valuable and create greater tax savings. When they retire and their income and giving capacity drop, they plan to supplement donations from income with distributions from their Donor Advised Fund, thereby providing a level of consistency and enabling them to continue giving generously to the causes about which they care.

Tax Management Tool

Anonymous Giving Tool

Some would rather give anonymously for a number of reasons, such as:

Prefer confidentiality

Avoid recognition

Minimize potential correspondence

Limit future expectations

Help someone needy without their knowing

from whom the help came

Between “me and God”

Unlike a private foundation, grants from a DAF can be completely anonymous.

Large Gifts to Multiple Ministries

Joe and Dawn Green

Worked in real estate and acquired several rental properties over the years

Would like to donate one of the properties to support their church and two of their favorite ministries

Selling the property would trigger a 30% capital gains tax.

What can they do?

Solution: Established the “Green Family Fund” using a DAF, and contributed the property to the fund.

This gave them an income tax deduction and bypassed federal and state capital gains taxes.

Once the property was sold, they were able to make grants from their DAF to their church and other ministries.

Estate Bequest Tool

Most people make changes to their list of charitable beneficiaries over time. To go to an attorney and update their wills or trusts to reflect these changes involves additional …

• Time • Effort • Expense

However, if one names his DAF as his charitable beneficiary, when modifying the list of charitable beneficiaries, it is simply a matter of sending a new letter to the ministry with the changes … all for the cost of a stamp.

Estate Bequest Tool

John and Mary Washington have an estate worth $20 million. They

believe that leaving to their five children a total inheritance equal

to the estate tax exemptions (assumed to be $5 million each, or

$10 million for John and Mary combined) is adequate. With the

remaining $10 million, they would like to begin giving to charity

both during their lifetimes and after death. They do not want to pay a dime of estate taxes … which unfortunately is their current default plan.

In evaluating their options, they seriously considered and liked the idea of a Private Family Foundation but were put off by the start-up costs, ongoing administrative and reporting requirements, regulatory requirements, etc.

“Isn’t there a better and easier way?!” they ask.

Gross Estate $20 million

Gifts to DAF During Lifetime

Advising DAF During Lifetime on Grants and Investments

Grants to Charities

Income Tax Deductions

Solution: Create a Donor Advised Fund with the Washingtons and their grown

children as the advisors.

Gross Estate $20 million

Gifts to Children at death of the Survivor. $2 million each

Gifts to DAF at Death of Survivor

Estate Tax Deduction

Solution: Create a Donor Advised Fund with the Washingtons and their grown children as the advisors.

Gross Estate $20 million

Grants to Charities Family Advises DAF on Grants Continuing the Family Legacy

Solution: Create a Donor Advised Fund with the Washingtons and their grown children as the advisors.

Caveat: You don’t need to be a multi-millionaire to use this DAF planning strategy.

Family Legacy Tool

Passing on the Family’s Values…

Penny is a generous widow who supports several local and international charities with both her treasure and her time. She is very concerned about the affluence that surrounds her three grandchildren and its affect on them (the disease otherwise known as “affluenza”). How can she pass on to the grandchildren her philanthropic values and provide them with practical hands-on training?

Solution: The Jones Family Intergenerational DAF.

Penny established and contributed seed money to a DAF. Every month, she and her three grandchildren get together for dinner, and Penny uses the time to discuss her philanthropic values, why she gives to certain charities, what she looks for in a charity,

etc. The grandkids bring to the table and discuss various charitable causes to which they have an interest in sending grants (within grandma’s guidelines of course!).

During Penny’s lifetime and after her death, the family advises the DAF on grants.

Gifts to DAF During Lifetime

Income Tax Deductions

Immediate Income Tax Deduction

Capital Gains Tax Bypass (Appreciated Assets)

Simplicity

Flexibility

Privacy

Simple Receipting

Legacy Planning

Management of Tax Deductions (Year End)

Benefits of a DAF

Someone who …

… needs time to make thoughtful giving decisions

… wants to support several ministries with one large gift

… desires maximum flexibility to change beneficiaries

… wants to maximize his giving through non-cash assets

… prefers to keep his giving confidential

… prefers a simple substitute for a private foundation

… desires to involve family members in giving

… needs end-of-year tax deductions

WHO?

Think about the difference you can make

and the good you can do for the Kingdom.

DAF Setup Steps

Easy as 1, 2, 3….

1. Complete simple application

2. Set up account online

3. Fund your donor advised fund

Donor First

https://tgcf.donorfirst.org Username: Demo_donor Password: Demodonor1

https://wycliffefoundation.donorfirst.org/ Username: Demo Password: Donor1

Our services are designed for you, our partners. This is our ministry to you.

Your information is kept confidential, and there is never any cost or obligation to give.

We can interact with your trusted advisors, as desired.

You may have multiple charitable interests. We believe it is the Holy Spirit’s job to direct you where to give.

How Can We Help You?

Why Include Us on Your Team?

No cost, no pressure, no hidden agenda

Help from friends you know and trust

Understand all of your options

You will reap the benefits of wise stewardship

Please feel free to contact Michael or Scott. We look forward to the opportunity to be of service to you and pledge our finest efforts and complete confidentiality.

Scott Talbot, ChFC®, CFP®, CAP® Director of Planned Giving Phone: (877) 281-2006 stalbot@gcfccc.org www.gcfccc.org

Michael J. Occhipinti, MBT Gift Planning Advisor Phone: (800) 681-5103 michael_occhipinti@wycliffe.org www.wycliffefoundation.org

May we be of service to you?