A Professional’s Take on Donor Advised Funds

Looking at PCF’s impact through a professional lens, Don Hall (pictured), Owner and Chief Investment Officer of Hall Capital Management, believes the donor advised fund (DAF) options at PCF offer his clients a way to maximize charitable impact, while minimizing income taxes. If a donor has abnormally high taxable income or capital gain in a given year, but does not wish to increase their charitable giving more than normal, the taxable income or gain can be offset by a gift to a DAF. The DAF can be tapped at any time in the future to supplement charitable giving when income is lower and perhaps not sufficient to continue normal charitable giving. Funds can be set up as charitable checkbooks or invested for a longer-term giving horizon.

For example, one of Don’s clients had a low-cost stock in a company that was being acquired. Faced with a large capital gain, the client donated some of his stock to a donor advised fund at PCF, enabling him to take a deduction in the year of his increased income. While this gift saved him substantial taxes, Don’s client appreciated how easy it was for him to direct gifts to charities of his choice, with PCF taking care of the gifts anonymously at his request.

Because of the maximum savings and simplified record keeping at tax time, Don often recommends PCF’s DAFs to clients. He even established one himself.

With recent tax reform, DAFs may also be useful to taxpayers who will take the new $24,000 standard deduction for married filers rather than itemize. For those taxpayers, a DAF is a vehicle that can allow one to make a larger charitable donation to a DAF one year and itemize their deductions. They can use the DAF to make charitable gifts in subsequent years to sustain their giving when taking the standard deduction. Without the use of the DAF a taxpayer who would usually take the standard deduction would derive no tax benefit from charitable gifts.