Taylor Schulte | Finance

Leave it to Costco. The retail giant began planning for the holidays and rolling out Christmas decorations in August!

While we don’t expect you to begin your year-end financial planning before your summer vacation ends, now might be a good time to begin.

One of the most common items we begin discussing during this time of year is charitable giving. The tax benefits are significant and it’s a topic clients are excited to talk about.

While there are many vehicles available to help support philanthropic giving, we find that “donor-advised funds” are one of the most efficient and effective giving vehicles. They are simple, low cost, and flexible. They allow donors to maximize the tax benefits of charitable giving while supporting their favorite organizations.

What is a Donor-Advised Fund?

A donor-advised fund, or DAF, is simply an account that helps givers manage their charitable contributions. Through an agreement with a DAF provider, a donor creates a specially named account (i.e. “Smith Family Fund”) to which irrevocable contributions are made. The donor receives an immediate tax deduction but is not forced to make any grants. They can work with their Financial Advisor to invest and grow the assets and recommend grants to their favorite non-profit, 501(c)(3) organizations at their leisure.

Why use a DAF?

Simplicity: Unlike a private foundation, the donor is not responsible for hiring attorneys and accountants or maintaining a board of directors.  The sponsoring organization that holds the fund takes responsibility of all the expensive administration work, including filing annual returns and preparing financial statements.

Tax efficiency: DAF contributions provide a federal income tax deduction up to 50 percent of adjusted gross income for cash contributions and up to 30 percent of adjusted gross income for appreciated securities.

Flexibility: DAF holders receive an immediate tax deduction for their contribution without having to choose a specific charity at the time that the donation was made. This flexibility helps donors maximize tax benefits while helping them be more systematic and methodical about their giving.

San Diego Giving Back

In June 2013, Charity Navigator named San Diego as the top philanthropic city in the U.S. The rapid growth of vehicles like donor-advised funds has helped San Diego donors give back more to the community and thrust San Diego back to the top of the charts.

Some of the non-profit organizations in San Diego that have been granted to with greater frequency from donor-advised funds include Challenged Athletes, Inc., San Diego Humane Society & SPCA, Invisible Children, Inc., and the San Diego Library Foundation.

Along with finishing up your holiday shopping, consider setting aside some time to get a head start on your year-end financial planning. You are likely to identify new opportunities that can save you money and help improve your overall financial picture.

For more information, please contact me for a copy of the latest “Giving Report” prepared by Fidelity Charitable. It offers a closer look into donor-advised funds and how non-profit organizations and donors may benefit from them.

Taylor Schulte is a CFP® professional for Beverly Hills Wealth Management in Downtown San Diego. Schulte specializes in providing independent, objective, financial advice to individuals, families, and businesses. He can be reached at 619-881-0388 or <a href=”[email protected]“>[email protected]</a>.