Taxpayers approach their tax accountants when they hear about “mysterious tax planning techniques” that may reduce their overall tax bill. These techniques may be beneficial, but they’re easily misunderstood. One such technique available to US taxpayers is a Donor Advised Fund, or DAF. For philanthropic taxpayers, a DAF can provide tax planning benefits while fulfilling their philanthropic objectives.
A DAF operates by allowing individuals to make irrevocable contributions into a general-purpose charitable fund, generally operated by a sponsoring organization (SO), many of which are investment brokerage firms. While legal control of the contributed assets shifts to the SO, the contributing individual generally directs which qualified organization receives the funds and when the contribution will be paid. Note that only 501(c)(3) organizations are allowed to receive contributions from a charitable fund. The individual also maintains a level of control of how the funds are invested within their charitable fund—noting that each fund’s limitations may vary.
DAFs are worth considering for the following reasons:
Every taxpayer’s situation is different. Consult your Vialto tax advisor or one of the individuals listed below to determine what planning is available to you.
Rob Cinberg
Partner
Law Firm Partner Services, Team Leader
robert.h.cinberg@vialto.com
Andrea Henderson
Director
andrea.henderson@vialto.com
Bill Dunn
Senior Manager
bill.dunn@vialto.com
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