Keep it in the Family

Market Memo

April 2024 – By Kyle Rohrwasser

Gifting and charitable contributions are a common occurrence for many of us. No matter if it is a large nonprofit organization or the local shelter down the street, we all have our own calls to action. We here at Vantage look to optimize that by gifting appreciated securities to avoid capital gain tax and reduce taxes via increased itemized deductions. We use a DAF (Donor Advised Funds) account which allows us to do this simply and efficiently. It is a wonderful tool that allows for convenient gifting as well as multi-year contributions in single tax years for some additional tax planning. Since you can keep the funds/cash in the account you can do large one-time gifts and distribute it over the course of years.

Throughout the years many of us have set up, given, and accumulated assets to DAF accounts but one item that, if missed, can cause a lot of problems is setting up successor trustees. Successor trustees are those who will distribute the funds after your passing. If you don’t have the successor trustee’s setup on the account, you could be putting the account into question and without specifics in the estate plan could become an orphaned account and move directly to the Custodians charitable fund. Yes, it will find its way to a charity eventually but most likely not the specific ones you had in mind. Be sure to set up multiple successor trustees on your DAF accounts to avoid this.

There is also some opportunity on the estate side as well. Instead of naming specific individual charities as beneficiaries in your estate planning documents, you could name a specific DAF account as the charitable beneficiary. Then the trustee can direct the funds as directed by the estate. So instead, multiple individual transactions it can be consolidated into one large transaction and then directed straight from the DAF account to the corresponding charities with ease.

If you have a DAF account, be sure to check and confirm your successor trustees. If you are charitably minded and have moving parts in your estate, maybe the DAF is another tool that can simplify the gifting process of the estate. Charitable contributions are just one piece in a large puzzle of financial planning but making sure that the transition after your death is just one more gift you can pass on to the family or friends.

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