Are Your Clients Ready to Talk About Bunching Now?

While we have seen an uptick in contributions to donor-advised funds since the passage of the Tax Cuts and Jobs Act (TCJA), we don’t believe we’ve seen its full effect with respect to bunching and donor-advised funds…yet.

The TCJA went into effect on January 1, 2018, but as you well know, 2018 taxes were not due until a few days ago, meaning your clients may not have fully understood what the TCJA meant for their bottom line until recently. Or perhaps your clients knew how the TCJA would impact their 2018 taxes and intended to bunch their charitable contributions into a donor-advised fund at the end of the year using appreciated stock. But the stock market tanked in December, and understandably, they didn’t want to pull the trigger on creating a donor-advised fund when their appreciated assets weren’t so appreciated anymore.

Whatever the case, 2018 taxes have been filed, the stock market has rebounded, and now is the perfect time to remind your clients of the benefits of bunching their charitable contributions with a donor-advised fund at CICF. Bunching permits a donor to:

  1. contribute several years’ worth of donations to a donor-advised fund
  2. itemize his or her tax deductions for that year and receive the charitable income tax deduction for the full amount contributed (plus avoid capital gains tax on the gain on appreciated assets donated to the fund); and
  3. grant money from the fund to the donor’s favorite charities over the desired number of years. In the subsequent years after the initial contribution is made, the donor then takes the standard deduction.

Better yet, you as your clients’ trusted financial advisor can retain management of the assets contributed to the donor-advised funds. When your clients open a donor-advised fund with CICF, they can recommend that CICF invest their charitable assets with you. In order to meet IRS requirements regarding donor control and tax deductibility of gifts, CICF becomes the legal owner of the charitable assets and signs an agreement with you that outlines a standard investment policy and indicates how investments will be benchmarked and monitored. In investing with you, CICF does not charge the client a separate investment fee; you individually negotiate your fee with CICF and your client.

Although CICF legally holds and controls the fund, the donor makes all grant recommendations: the charity to which it should be directed, the amount of the grant, and the timing. CICF donor-advised funds have no requirements as to when the funds must be spent out, so donors have the flexibility to spread out gifts from the fund over any time period. Moreover, assets that are not immediately spent out from the fund will see an investment return, ultimately growing the pool of charitable dollars.

Not only do donors to a donor-advised fund at CICF receive strategic tax benefits, but CICF’s effective philanthropy team also works with them to ensure their philanthropy is as impactful and meaningful as possible. Your client’s effective philanthropy officer, assigned when the fund is opened, can assist with with any number of philanthropic services, including creating a mission statement and vision for the fund, engaging multiple generations in grant making, arranging site visits with not-for-profits in which the client may be interested, researching the client’s interest areas, making recommendations on potential grantees and much more.

interested in learning more about how CICF can help your clients be strategic with both their taxes and their philanthropy? Contact us.

Mary Stanley
Director and Legal Counsel for Charitable Gift Planning
317.634.2423 x319

Sarah Weaver
Senior Gift Planning Advisor
317.634.2423 x510

Brittany Rayburn
Director of Development at Hamilton County Community Foundation
317.634.2423 x302

This article is provided for informational purposes only and should not be construed as legal or financial advice. Each individual’s situation is unique, so before making any decisions around charitable giving, including those discussed herein, you should consult your own legal and financial advisors.

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