After having helped so many of our Geyer Law estate planning clients take advantage of donor-advised funds, we were amused and encouraged to read the indignant defense of the strategy written by Randy A. Fox in Wealth Management Magazine…
“Let me tell you about the very rich. They are different from you and me,” author F. Scott Fitzgerald famously stated. Wealth strategist Randy A. Fox, writing to an audience of financial advisors, begs to differ. Angry that “the mass media isn’t helping the perception of large-scale charitable giving as a ‘tax dodge’ for the super-wealthy”, Fox cites an article in the New York Times about the CEO of Nvidia, Jensen Huang, who has created a donor-advised fund. According to the Times, the donor-advised fund “reduces his eventual estate tax bill even if that money never goes to charity.” Wrong, wrong, wrong, Fox explains. That money has already been given to charity. “It may not have reached the end user charity yet, but the funds will get there when Huang and his family identify the causes they believe in and want to support.”
The IRS website explains how donor-advised funds work:
- Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization.
- Contributions of cash, stock, real estate, or other assets are made by individual donors.
- Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor’s representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account.
- The funds grow tax-free inside the account.
- Contributions are irrevocable, meaning they cannot be taken back once they are gifted.
The main benefit of using a Donor Advised Fund, as Schwab Charitable explains, is “the ability to make a donation and take an immediate tax deduction for it while waiting to decide how the donation should actually be used. That advantage is the same whether you’re a billionaire or a small donor. As Randy Fox so vehemently emphasizes, after citing the incorrect impression the New York Times’ article and other articles are creating. “The tax system, Fox stresses, “is the same for all of us.”
Since charitable planning is inextricably related to our clients’ overall estate planning, donor-advised funds are one of the many important tactics we include in our discussions at Geyer Law.
– by Ronnie of the Rebecca W Geyer & Associates blog team
