Without the right strategy, even the best intentions can go to waste.
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Quick Tax Tip
With Art Werner
CPE Today
Charitable giving can be a powerful tool for clients seeking tax advantages and for ensuring their donations are used wisely. Yet, many clients—and even some professionals—remain unaware of one of the most accessible vehicles for achieving these goals: donor-advised funds.
“The average client has no idea that a donor-advised fund exists,” Werner says. “And if I, as a professional, am not aware of a technique, I probably won’t use it — not because I’m afraid of it, but because I’m ignorant of the ability to utilize it.”
A donor-advised fund is a simple yet powerful charitable planning tool. It allows an individual to make a significant charitable contribution upfront, claim an immediate tax deduction, and then distribute the funds to charities over time. This approach provides flexibility and greater oversight of how donations are ultimately used.
Drawing from his own experience, Werner shares the story of a client passionate about supporting the Salvation Army. She wanted to make a large donation but worried about how the funds would be spent. Working together, they used a donor-advised fund to donate $100,000, stipulating that $10,000 would be distributed annually over a decade. Organizations seeking funding had to apply each year and explain how they used the prior year’s grant before receiving more.
This strategy provided Werner’s client with a significant tax deduction immediately while ensuring her charitable intentions were honored over time. Without knowledge of donor-advised funds, the client would have faced setting up a costly private foundation — a cumbersome option for a $100,000 gift.
“This took care of all the hidden issues,” Werner says. “It was a win-win.”
Staying informed about evolving charitable planning tools can unlock significant benefits for clients. Werner urges CPAs and tax professionals to educate themselves about donor-advised funds and other charitable giving techniques to better serve their clients’ philanthropic and financial goals.