Background: We have a successful business client that finds its owners wanting to do as much as possible for the charities that exist in their community. Both owners give of their personal time and treasure, as well as from their company.
Our Case: The Client wants to encourage charitable giving for their clients, their employees and their community. They would prefer to help by providing a way to better support the chosen charities of their clients and employees. They would like to be as tax efficient as possible in their giving efforts.
The Question: Is there a simple way for our client to help their clients and employees give more to their own preferred charities? And is there a way to be more tax efficient in doing this?
The Results: We suggested the client establish three DAFs (Donor Advised Funds), one for their company and one for each owner. We then suggested two ways to meet their goals.
- First, they can donate funds from their various entities to the company DAF. The company DAF can then transfer funds to each personal DAF. This transfer saves the owners’ payroll taxes on the contributed amounts.
- Second, they can create a grant program for both their clients and employees that allows their company DAF to match or make outright gifts to the charities chosen by the clients and employees.
Tax wise, the business can take deductions when they wish to; at the point of contributions, they will save payroll taxes and donate funds to those charities at future desired times.
Bottom Line: By establishing DAFs, our client met their goal of more efficient personal giving and found a way to support favorite charities of their clients and employees. The client has now found that giving is easier, that tax benefits are created when desired and that clients and employees like the new-found funds for their favorite charities. The client has also decided to provide Pro Bono professional services to any charity that seeks their assistance and has encouraged other businesses to duplicate what they are doing.
This is a hypothetical example for illustrative purposes only. The experience of this client may not be representative of the experience of all clients and is not indicative of future results. Any tax advice contained herein is of a general nature and is not intended for public dissemination. Further, you should seek specific tax advice from your tax professional before pursuing any idea contemplated herein. This advice is being provided solely as an incidental service to our business as financial planner. Securities offered through ValMark Securities, Inc. Member FINRA, SIPC. Financial Planning and Investment Advisory Services offered through B & E Investment Advisers, Inc., a State Registered Investment Adviser, Business & Estate Advisers, Inc. and B & E Investment Advisers, Inc. are separate entities from ValMark Securities.
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