In recent years, financial advisors have increasingly been setting up donor-advised funds (DAFs) for clients who wish to contribute to charities. Despite the advantages, some individuals have yet to take this step. DAFs offer immediate tax deductions, the freedom to distribute funds over time, online donation capabilities, privacy options, low fees, and the growth of assets in a tax-free environment. They also simplify the process by consolidating donation receipts into a single annual statement.
As the year draws to a close, advisors should seize the opportunity to encourage clients to consider DAFs. They might ask clients if they:
- Regularly donate to charities and plan to continue or increase their contributions.
- Seek to reduce taxes, particularly on highly appreciated assets.
- Are expecting significant income and want to allocate some for future donations.
- Need a substantial tax deduction now but require time to select charities.
- Find themselves hurriedly making donations at year’s end.
- Experience variable income which complicates consistent charitable giving.
…and several other critical questions that can help clients reflect on their charitable strategies.
While some may not be ready to transition to a DAF immediately, initiating this conversation is crucial during this peak season of giving. It’s a period when many are thinking about their philanthropic impact and may be open to more effective ways to support their favored causes.
For those who have not yet decided to open a DAF, direct contributions to charities are still valuable and necessary. However, by discussing DAFs now, clients may be more inclined to set up their DAF earlier in the following year, thus avoiding the end-of-year rush.
If you are contemplating your charitable giving options and wish to explore the benefits of donor-advised funds further, we invite you to reach out to our team. We are committed to guiding you through the process, ensuring that your philanthropic efforts are as impactful and efficient as possible.