Wealth Management & Financial Planning

Wealth Management & Financial Planning

‘Tis the Season for Giving

Did you know two tax codes exist? Most people will tell you one is for the rich and one is for the poor. That is not true. The real answer is there is one for the informed and one for the uninformed. At the Financial Enhancement Group, we take pride in our ability to help our families optimize their tax returns every year. Since it is the season for giving, we are currently helping many of our families with gifting strategies. One of those strategies is a Donor Advised Fund (DAF).

A DAF is a private fund that is administered by a third party called a sponsoring organization. The sponsoring organization is a 501(c)(3) and is responsible for managing charitable donations on behalf of an organization or family. Once the DAF is created, the donor receives a tax deduction for the amount put in for that calendar year up to the deduction limits. The donor is then able to tell the sponsoring organization how much and when they would like a gift to be sent out to the church/charity of their choice. The sponsoring organization then cuts the check and mails it to the church or charity that was specified by the donor.

When you give to a 501(c)(3) organization, the tax code allows you to deduct that gift from your Adjusted Gross Income (AGI). You do not need a DAF to receive the deduction. So why go through the hassle of making charitable gifts through a third party?

The answer is DAFs are not for everyone. A good DAF candidate is, first and foremost, someone who is charitably inclined. Giving should never be done for the sole purpose of saving money on your taxes. With that in mind, if you have a larger the normal AGI this year due to the sale of your business or real estate, making a large donation to the DAF will lower your tax implications. The idea being that you can make multiple years of charitable gifts all in one year – you get the benefit of paying less taxes, and the charitable organizations will still receive your donations when you send them through the DAF over the next several years. Another candidate is someone who has a large amount of tax-deferred assets; they are about to retire and will have a gap of time before they can use Qualified Charitable Distributions (QCDs) from their tax-deferred IRA accounts, and they want to give the same amount during those gap years even though their income is lower during retirement. We would help them put as many years of gifts as needed into their DAF to reach age 70 ½ (QCD age) and take advantage of the tax benefits while their income is still high.

This is the season for giving. Please reach out if you would like help on how to be a better giver. We want to help you give in a way that is most beneficial to you and the organizations you support. Visit www.thebettergiver.com to learn more.


The Financial Enhancement Group is an SEC Registered Investment Advisor. Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.

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