Advising your clients on Donor-Advised Funds

Financial advisors have a privileged position in the life of their clients. They get to know their dreams, fears, families, and the legacy they want to leave behind. Financial advisors help clients grow and protect their assets. They also help them give their assets away to charities and causes that have grabbed their hearts.   

Financial advisors often recommend different investment opportunities and asset classes to their clients. Advisors may not be as well-versed when it comes to charitable solutions like Donor-Advised Funds. Financial advisors should take note of four distinct advantages of Donor-Advised Funds for their clients.

#1: Advisor advantages

A financial advisor can retain management of the assets their client donates to a Donor-Advised Fund. Some advisors are often unaware of this possibility and are understandably hesitant to steer their clients toward a Donor-Advised Fund.

The process is simple. Here’s how it works:

• The Generosity Trust will open an account with the advisor’s brokerage firm where the funds will be held. The donor will be listed as an interested party on the account.
• When assets are transferred into the account, The Generosity Trust will issue a receipt to the donor for a charitable donation.
• As an advisor, you will retain the ability to make investment decisions pertaining to these funds.

You and your client can have peace of mind that you will remain intimately involved in the management of these funds.

#2: Tax advantages

Generosity has tax advantages for many clients. It enables them to advance the mission of organizations and ministries they love while lowering their tax burden in the process. When your client donates cash or an appreciated asset to a Donor-Advised Fund, the gift is immediately eligible for a deduction for the tax year in which it was given.  It is important to note that the appreciated asset must have been held for more than one year to get the favorable tax treatment – deduction at fair market value.  Otherwise, the deduction is limited to the donor’s cost basis.

For donors who may be contributing a sum that does not merit individual management from their advisor, The Generosity Trust offers a Donor-Advised Fund with no fees – our simple Giving Fund. While a Giving Fund has no investment nature to the assets in the fund, TGT does not charge any fees on this type of fund, so there are literally no costs to the donor. A Donor-Advised Fund is a strategic way to gain the advantage of a tax deduction while also having time to consider the worthy causes you’d like to support.

#3: Giving advantages

It isn’t unusual for your clients to experience a sudden influx of cash through a bonus, an inheritance, the sale of an appreciated asset, or another liquidity event. If they want to be generous, a Donor-Advised Fund provides two advantages when it comes to giving to their favorite nonprofits.

First, a Donor-Advised Fund provides your clients with time to consider the organizations they want to support. Though their gift is immediately tax-deductible, they can take all the time they want to think about how they’d like to see the funds distributed. This is especially helpful as the calendar year draws to a close and your clients need to make a donation by the end of the year to lower their tax bill.

Second, a Donor-Advised Fund provides your clients with the option of anonymity. Your client can choose to make grants anonymously through their Donor-Advised Fund. Of course, they are also free to have their information shared with their grant recipients as well.

There are a number of other giving options available to your clients when they have a Donor-Advised Fund such as scheduling their grants to be distributed on a particular cadence (every month or quarter) to organizations they would like to support on a consistent basis.

Donor-Advised Funds create a win-win for financial advisors and their clients. It provides a charitable solution for generous clients while enabling advisors to stay involved in the management of assets. The Generosity Trust is proud to work alongside a number of financial advisors across the country in serving clients.

Download our financial advisor brochure to learn more about how The Generosity Trust can work alongside you to serve your clients.