Summary of Tax Benefits for Contributions to Donor Advised Fund (DAF) or Donor Restricted Fund (DRF):
- Immediate and Maximum Income Tax Benefits
- Avoid Capital Gains Tax
- Avoid Estate Tax
- Assets Grow Tax-Free
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Give private business interests (S-Corp, C-Corp, LLCs, and LPs) to a Donor Advised Fund (DAF) or a Donor Restricted Fund (DRF).
In gifts of pass-through assets (S-Corp, LLCs, LPs), the charity takes on the donor’s cost basis and incurs Unrelated Business Income Tax (UBIT) when the assets are sold by the charity.
iGiftFund offers a unique strategy that reduces the effective UBIT by 60% leaving more AUM in DAF or the DRF.
Note: Gifts of C-Corp and other non-pass-through assets are generally not subject to UBIT.
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Contribute Restricted Shares to the DAF.
The DAF or DRF can hold the restricted shares pending notice by the company general counsel that the gifted shares can be sold or transferred.
Clients can claim immediate and maximum tax benefits. Once the company’s general counsel removes all restrictions, the gifted shares may sold by the DAF or DRF.
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Combine portfolio rebalancing on taxable assets with gifts to a DAF or a DRF
Clients can gift over-represented, long-term appreciated assets to a DAF or a DRF instead of selling the assets.
This strategy allows the donor to claim immediate and maximum tax benefits and avoid capital gains tax on the gifted assets.
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Offset the tax liability on Roth conversions by gifting other assets to the DAF or DRF.
The Roth and the DAF or DRF are similar in that, in both instances, funds come from a tax-deferred account (the IRA) and go to a totally tax-free account (the DAF or the DRF) and are not subject to RMDs.
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Accelerate the termination of a Charitable Remainder Trust (CRT) into a DAF or a DRF.
In this strategy, the donor assigns the income interest and the remainder interest to a DAF or a DRF. Since the DAF or DRF are now both income and remainder beneficiary, assets in the original CRT are collapsed in the DAF or DRF.
This CRT acceleration strategy enables donors to support their charitable interests while living, and it may generate a substantial, additional income tax deduction when the original income tax deduction is recomputed to reflect the earlier remainder distribution.
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Make a tax-free, Qualified Charitable Distribution (QCD) from a traditional IRA to a DRF
Normally, distributions from a traditional IRA are taxable when received. Clients age 70½ and older (and spouses, if eligible) can direct QCDs of up to $100,000 per year, tax-free, from their traditional IRAs to a DRF.
Note: DAFs, Private Foundations, and Supporting Organizations are not eligible to receive QCDs).
| Note 1 iGiftFund is now ranked #2 among the top 20 DAF sponsors in the country: https://www.donoradvisedfunds.com/search |
Unlike most national DAF sponsor programs, iGiftFund offers a wide range of donor-restricted funds (DRF) that you can manage, i.e. Designated Funds, Chartable Endowment Funds, Scholarship Funds, Field-of-Interest Funds, etc. Since DRFs funds are not DAFs, they are eligible to receive QCDs tax-free.
When the client reaches age 73 and is subject to a Required Minimum Distributions (RMD), amounts taken as a QCD count towards the RMD.
About iGiftFund – With the hallmarks of simplicity, accessibility, and low administrative fees, iGiftFund sets the standard of excellence in the industry and distinguishes itself from the large, national DAF sponsors. Based in Hudson, Ohio, iGiftFund works with donors and with financial advisors on their familiar investment platform, in open architecture at all fund size levels. iGiftFund has the longest experience and the lowest administrative fees in the DAF industry.