Now is the time of year to think about your giving, especially for those wage earners who will receive year-end bonuses. But what if you want to take advantage of the tax deduction but aren’t sure what charities you want to give to yet? Donor-Advised Funds (DAFs) are a simple solution. Though not a new product, DAFs have received renewed attention due to the recent changes in the tax laws. Not only do DAFs provide the “deduct-now-give-later” appeal, but they offer a number of benefits, including “bunching” of deductions -- especially attractive to high-income earners.
Lee’s Summit resident Stephen Stricklin, CFP, recommends DAFs to offer a flexible giving strategy. Stricklin is the founder and CEO of Wise Wealth, LLC in downtown Lee’s Summit, with another location in Liberty. Stricklin simplifies DAFs into three words:
Individuals or couples can make tax-deductible grants (contributions) into a DAF. The IRS allows taxpayers to deduct up to 60% of Annual Gross Income (AGI) for cash gifts into a DAF. Up to 30% of AGI can be deducted for “non-cash” gifts (low cost basis, highly appreciated stock; real estate; etc).
The donated funds can be distributed to charities immediately or in the future. The amounts that someone wants to give later (or if they don’t know how or where to give yet) can be invested and have the ability to increase in value over time. The investments in the DAF grow tax-deferred and are given out to charities tax-free. Funds in a DAF can be professionally managed by a financial advisor, if desired.
Once funds are in a DAF, they can’t come back out unless given/granted directly to a charity or non-profit 501(c)3 organization through one-time or recurring gifts.
Tax deduction on amounts in the year given.
Flexibility to give to charity or causes over time.
Flexibility to grant one-time gifts and/or set up regular, recurring grants.
Flexibility to give away entire amount or only interest each year. No requirements to make grants annually or ever.
Ability to create a family legacy of giving, and your kids can inherit the giving account.
Easy charitable gifts/donations tracking (one annual tax report instead of multiple charitable receipts) with optional online and anonymous giving.
“Wise Wealth can help you open up a DAF through any community foundation,” Stricklin says. “The community foundation serves as the custodian for your DAF. Truman Heartland, Greater KC, and The Signatry are a few recommended local community foundations offering DAFs.”
Stricklin, who began Wise Wealth in 2007, believes everyone should have a written financial plan that is simple to understand and gives them peace of mind.
“People are sometimes intimidated or not sure they’ve saved enough to qualify talking to a financial planner, but there’s no cost or obligation to come in and speak to an advisor. We want to help everyone achieve their financial goals. First wisdom, then wealth.”
“I believe in the motto, Live here - Invest here. Lee’s Summit is a wonderful place to live, to conduct business, and to invest in. My wife and I have raised our four kids here, and we love the people in Lee’s Summit and its proximity to Kansas City. It’s safe, with wonderful parks, education, community centers, and a thriving downtown.”
To schedule a consultation and receive a free copy of Stricklin’s popular handbook, Simplify Your Retirement, contact: