On December 9th, the markets hit their 13th record close since the November elections. Accompanying the records in the market, we have also seen what feels like a record number of opinions of what the change in administrations will mean for taxes. Some of these opinions have focused on the potential tax changes and their effects on the charities and the charitable deduction. Fidelity Charitable offered what I consider a measured and reasonable framework for the possibilities. It is safe to conclude that there is at least a good likelihood that the benefits of giving in 2016 may be more tax wise than in future years. If you believe that to be true, these next few days may be ideal for starting a donor advised fund. Here’s why:
Tax Benefits in 2016, Grant in 2017 and Beyond: Right now, this simple and unique benefit of a donor advised fund could be its biggest. Donors can take a deduction in 2016 and reserve the right to recommend grants in future years. If you can use a tax deduction this year, you can get it and “lock-in” its’ benefits. You do not have to decide where you want its support to go at this time, you can choose the charity at a later date.
You Don’t Need to be Bill Gates: If you have been following donor advised funds for several years, you may remember the gift minimums to be $25,000 and above. These minimums have come down over the years. In fact, The Advise Us Fund‘s gift minimum is $2,500. With the lower minimums, it may be feasible to “pre-pay” a year or two of your giving with the gift.
Higher Rates Give Better Benefit: If the capital gains rates and income tax rates decrease, you can receive greater real tax savings in 2016. Please realize that this premise is not a forgone conclusion, it is just speculation (albeit solid speculation). If you give in 2016, your deduction will increase your deductions in a year where tax rates may be higher.
And Please Don’t Forget It’s Not Too Late: Finally, if you are reading this article thinking it’s too late, please think again. Gifts made through the mail are based on the post mark on the envelope. If you use a credit card online, it’s the time that card processes. Gifts of securities transferred electronically are based on the date the charity receives control of the security. These gifts usually only take 1-3 business days.
Andrew Hibel serves as President and is the Founder of The Advise Us Fund. He is also Chief Operating Officer and Co-Founder of HigherEdJobs. Andrew holds a B.A. in Economics and a M.Ed. from the University of Illinois, and a J.D. from Indiana University, Indianapolis. He has been a planned giving officer for Penn State University and Advocate Charitable Foundation and served as Director of Gift Planning and Estate Administration for the Jewish Federation of Metropolitan Chicago.
The information in this blog post is general and educational. It is not intended nor should it be construed as legal, tax, investing or financial advice. Individuals should consult with their own advisor about charitable giving arrangements The Advise Us Fund® may describe.