Issue 1.16
I have a neighbor named Dave that loves tools. He is a welder by trade and can fix anything.
He built a huge garage, a true man cave, next to his house. The addition even has the head of a buffalo that Dave killed in the Henry Mountains of Southeastern Utah.
Underneath the mounted buffalo head are tools – hundreds of tools. I’m sure Dave has a “best” tool.
My tools are not like Dave’s tools. In my toolbox at home, I have a hammer, two screwdrivers, a pair of pliers, and of course duct tape.
However, for 20 years as an estate planning attorney, I have used “tools” to help save taxes and facilitate the administration of my clients’ estates.
I have a “best” tool that I really like to use. In order to avoid thousands, even up to hundreds of thousands of dollars in taxes for clients, I reach for the Donor Advised Fund on my charitable giving “tool shelf.”
Donor Advised Funds are sub-funds of a larger charitable entity. They are an individual’s or family’s own private charity.
Monies or investments go into the fund with a tax deduction and grow tax free. The monies come out tax free, but must be directed to churches, schools or other charitable 501(c)(3) organizations.
A Donor Advised Fund is a wonderful estate planning tool for three reasons.
First, it is refreshingly simple. Many estate planning tools are difficult and complex. A donor advised fund can usually be set up using a standard form of two or three pages.
Second, Donor Advised Funds can be someone’s own private “charitable checkbook.” Monies left in a fund for family members can be used through decades of charitable giving for your children and grandchildren.
Third, if IRA or 401k monies are left to a Donor Advised Fund upon your death, significant amounts of taxes are avoided. Every dollar that would have been taxed can flow into the Donor Advised Fund tax free and can continue to grow tax free – Uncle Sam doesn’t get a dime.
Just as my neighbor Dave has his “best” tool for the job, I love using Donor Advised Funds. They can eliminate tens of thousands of dollars in taxes and are a great tool for charitable giving.
Jeffery J. McKenna is a business and estate planning attorney serving clients for over 20 years. He is a founding member and former President of the Southern Utah Estate Planning Council and a shareholder in the Law Offices of Barney McKenna and Olmstead with offices in St. George and Mesquite. If you have questions regarding this article or if you have a topic you wish to have addressed in this column, you can call 628-1711 or email jmckenna@barney-mckenna.com.