Giving in a down market? Donor-advised funds to the rescue

By Josh Dukelow, gift planning officer

Now is the time to discuss charitable giving with your clients, especially those who contributed appreciated-securities to their donor-advised funds during the stock market’s long bull run. This year’s bear market doesn’t mean their year-end charitable giving has to take a hit; clients can use their donor-advised fund to support their favorite organizations. What should they (and you as their advisor) do right now to make the most of this strategy?  

Giving appreciated stock to charitable organizations is an effective tax and charitable planning strategy. During years when highly-appreciated stock is in short supply, however, implementing this strategy may be challenging. This is when donor-advised funds (DAFs) come in especially handy. Here are five year-end “DAF giving tips” for you and your clients to consider: 

• When the Tax Cuts & Jobs Act of 2017 raised the standard deduction, it meant fewer people itemizing their charitable deductions. Tax-wise donors can use a DAF to “batch” their giving from several years into one contribution. They can itemize the larger amount that year, and in future years they can take the standard deduction while giving to charity from the DAF. 
• Similarly, for some clients, this may be a year to consider contributing cash to a DAF instead of donating highly-appreciated stock. Gifts of cash could reduce the burden on a client’s personal stock positions that may have fallen in value, giving these positions time to recover as the market bounces back.  
• For some clients, now may be a good time to consider using their cryptocurrency to creatively meet their charitable giving goals. A client could, for instance, sell their cryptocurrency at a loss and contribute the cash to their DAF. Then, the client can keep an eye on the cryptocurrency market and decide when to wade back in. We are also accepting donations of cryptocurrency directly, for those who still have gains in their holdings, and these proceeds can be added to a DAF or given directly to a nonprofit. 
• Now is a good time to help your clients to evaluate the asset allocation in their DAFs, for those funds you manage. Cash positions in their DAFs might be a good potential source of funds for year-end giving. 
• Finally, consider encouraging your clients who have not yet established DAFs at the Community Foundation to consider doing so now. Not only does a DAF help organize charitable giving, but over the long term it can also protect a client’s ability to support favorite charitable organizations even when market conditions are rough. 

The team at the Community Foundation is always happy to help your clients maximize both the philanthropic and financial elements of their charitable giving strategies. We look forward to hearing from you. For more information, please contact Alison O’Carroll, director and philanthropic counsel, at 404.333.0241 or aocarroll@cfgreateratlanta.org.