Investment Giving

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Need a deduction? Consider a Donor Advised Fund

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There are years when a tax deduction can be really helpful. As we go through life, our little deductions grow up and move away, the house gets paid off, and our income likely increases. The result is paying higher income tax bills. If you are in this situation and are charitably inclined, consider establishing a Donor Advised Fund (DAF).

The IRS allows a donor to receive a charitable deduction for the current tax year by contributing to a DAF, but a DAF provides the flexibility to make the actual distribution to charities in both current and future tax years. In other words, a DAF allows a donor to take the tax deduction now and decide who will receive it later. Any amounts that remain in the DAF from year to year can be invested and grow within the fund, which could allow for even more gifting. In this scenario everybody wins, except maybe Uncle Sam.

Another benefit is that a DAF may be used to allow children or grandchildren to make grants during or after a donor's lifetime, creating a "culture of giving" among extended family members. A DAF can also be named in honor of the donor. This strategy works well. Transfers are irrevocable and there are caps on the amounts that are deductible each year. Speak with a tax advisor before implementing this strategy.

No one likes to pay too much in taxes. A Donor Advised Fund is one way to cut your tax bill and help do some good in your community at the same time.



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Guest Tuesday, 12 December 2017