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Tax-Smart Strategies

Donor Advised Funds (DAF)

Donor Advised Funds (DAF)

A donor-advised fund allows clients to support qualified charities and non-profit organizations, both now and in the future, through a charitable investment account, conferring immediate tax benefits. When opening a donor-advised fund, the donor irrevocably transfers assets (cash, publicly traded securities, restricted stock, or even complex, non-traded private business interests) to the respective donor-advised fund sponsor.

Ideal Clients

  • Charitably inclined taxpayers who could benefit from tax deductions.
  • Philanthropists who are undecided about the charitable recipients of their giving.
  • Donors that do not need to generate an income stream from the donated assets.
Charitable Remainder Trusts (CRT)

Charitable Remainder Trusts (CRT)

 

These tax-exempt, split-interest trusts generate a periodic income stream of at least 5% annually for a beneficiary, typically the donor, through irrevocably donated assets. After the predetermined length (at maximum, 20 years) or the donor's death, a charitable organization receives the remaining funds. The two most common types of charitable remainder trusts are:

  • Charitable remainder annuity trusts (CRAT), which distribute a fixed amount each year and do not allow additional contributions.
  • Charitable remainder unit trusts (CRUT), which distribute a fixed percentage of the trust assets (revalued annually) and do allow additional contributions. These unit trusts may have net income or net income with makeup provisions.

Ideal Clients

  • Charitably inclined taxpayers in need of an income stream generated by donated assets, provided they are eligible and would benefit from tax deductions.
  • Philanthropists who have already decided on the charitable recipients of their giving.

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