Donor-Advised Funds: The Best Way to Give Back

Daniel Kramer of Kramer Financial Group in New York City describes the appeal of DAFs for tax management.

"Several of my clients use a 'bunching' strategy where they put two or three years' worth of charitable gifts into one year, and then give out of that over the next few years while taking their standardized deduction," explains Kramer.

For a bunching strategy to be effective, the amount of the client's concentrated donation should exceed their standard deduction ($12,000 for individuals, $24,000 for married couples filing jointly), enabling them to itemize in year one. Bunching can be especially useful in years in which a client receives a windfall that would bump them into a higher tax bracket.

DAFs as a Family Foundation

Advisors who help clients establish a DAF have an opportunity to build the relationship not only with clients, but also with their clients' children. With $59 trillion expected to be handed down to millennials and Gen Z in the coming years, cultivating relationships with the next generation has become that much more important. Bringing multiple generations together around the family's charitable giving plans is a great way to build relationships with family members you might not know well.

Kramer suggests viewing a client's DAF as their family foundation and a way to engage clients' children in charitable giving. Involving children in decisions around how the money gets put to use can be a way to pass down family values and give younger kids a vision for making a positive impact in the world.

As an advisor, your ability to provide an impactful charitable giving strategy in a year in which needs are so great is a win-win for your client, the philanthropies they support, and your practice. To find ideas for reputable charities, visit www.charitynavigator.org.