Planning for Charitable Giving


In this season of giving, many take this opportunity to give back to their community, to meaningful causes and to their favorite charities. While supporting the organizations you value is important, understanding your options for giving is just as important. According to managing member Doug Loftus, “having a planned giving strategy that is part of your overall financial plan ensures that you are able to optimize philanthropic opportunities and do so in the most convenient, cost effective and tax efficient way.”

At Wealth Dimensions, we enable clients to manage their finances by having a comprehensive financial plan for every stage in their life. “As part of the planning process, it is important to have conversations with clients about charitable giving—what motivates their giving, how it fits with their long-term goals and how they would like to include their family,” said Tom Curti, managing member. “By integrating these gifting goals into the plan, clients are able to build their charitable vision and align it with their financial resources.”

Once the long- and short-term philanthropic goals are identified, it’s essential to review various charitable vehicles to determine the most advantageous strategic approach for giving. By taking the time to focus your giving, you are able to clarify your goals, determine the ideal use of your resources, measure your progress and have a clear plan to achieve your giving purpose.

Using donor-advised funds

One charitable vehicle that has grown in popularity is the donor-advised fund (DAF). These funds provide a long-term planned approach that can alleviate the year-end urgency and offer the opportunity to save a significant amount in taxes.

A donor-advised fund (DAF) is administered by a public charity. It is typically established by a financial services company, a community foundation or a university to manage charitable donations on behalf of organizations, families or individuals. Donors make a charitable contribution to the DAF now and receive a tax deduction. The contributions are invested with the potential to grow over time, offering donors the potential to increase their impact on the causes they support. Future gains on these funds are sheltered from taxation. Donors recommend future distributions of their donations to qualified organizations, using their discretion to determine timing and the amounts.

Donors receive an immediate tax deduction after making a charitable contribution to one of these funds. The deduction represents up to 50 percent of adjusted gross income for gifts of cash and up to 30 percent of adjusted gross income for gifts of appreciated assets. A Fidelity Charitable study indicates that clients find integrating charitable planning into an overall financial plan facilitates tax planning (76 percent) and enables them to give more money to charity (47 percent), among other benefits.

DAFs provide a streamlined and systematic process for making charitable donations that allow donors to maximize their generosity. Donors gain the ability to make contributions using a variety of assets. According to Fidelity Charitable, nearly 91% of donors give cash donations simply because they are not aware of other far more strategic alternatives to cash gifts. Donating long-term, appreciated assets, such as appreciated securities, mutual funds and real estate, allows donors to avoid or minimize capital gains taxes and take a full, fair market value deduction for the assets at the time of donation. By reducing taxes, this enables donors to redirect more to charitable purposes.

After contributing assets to a DAF account, donors recommend how funds can be invested to meet short- or long-term giving goals. Donors can take the maximum tax deduction available once they have made their irrevocable contribution. The public charity holds and controls the assets, while the donor has advisory privileges over the distribution of charitable grants. Essentially, the grants are then considered recommendations by donors and not made by them.

DAFs also offer a less expensive alternative to managing your own foundation. Private foundations tend to have higher administrative costs and are more time consuming than DAFs. The startup costs for foundations require more money and assets. For DAFs, the lower administrative costs result in more money going directly to the charitable cause.

Another option is to use a DAF as a complement to a foundation. By allocating some contributions from the foundation to a DAF, foundations can alleviate some paperwork and due diligence. From a tax perspective, a DAF is governed by different regulations. The tax deduction limit for gifts of cash to a DAF is 50 percent of adjusted gross income, while it is 30 percent for foundations. The deduction limit for gifts of stock or other assets is 30 percent of adjusted gross income, and only 20 percent for foundations.

Depending on your giving goals and specific financial situation, selecting a donor-advised fund can provide many advantages. Contributing to a DAF can:

  • Make giving more tax-efficient and better for tax planning
  • Provide an alternative to managing a private foundation or complement it
  • Create a structure for allocating funds for future giving
  • Simplify recordkeeping
  • Present the opportunity for anonymity
  • Enable you to build a charitable legacy

Donor-advised funds are increasingly becoming part of a well-executed charitable giving plan.  “Clarifying your charitable giving goals and integrating them into your financial plan ensures that you will be able to support the organizations whose work you value,” said Doug Loftus. “Bringing this all together enables you to gain control and maximize the impact of your contributions.”

For informational purposes only. Not intended as investment advice or a recommendation of any particular security or strategy. Past performance is not indicative of future results. Information prepared from third-party sources is believed to be reliable though its accuracy is not guaranteed. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. For more information about Wealth Dimensions, including our Form ADV Part 2A Brochure, please visit or contact us at 513-554-6000. Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

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