B (3:43)

Thank you, Jill. It's a pleasure to be here. Thanks for having me.

A (3:46)

Can you first start the little bit of the background of a donor advised fund, how they came to be and explain to folks who are not familiar with them, who don't listen to us, maybe every single time we talk about this, even though I love talking about them, what is a donor advised fund?

B (4:04)

We were established 1999 under the premise that in an effort to support clients with their savings and investments goals, it became more and more clear that charitable giving and philanthropy was almost as much a priority for them even at that point as their broader approach to wealth planning, savings, investments, and so forth. And so we established death giving 360 as a donor advised fund on behalf of our clients and the advisors who support it. And in its simplest terms, a donor Advised fund is really an account for charitable giving where there's a threefold process. A donor contributes to the account and that contribution can take the form of cash, publicly traded stock, real estate, collectibles, really anything that's appreciated in value. We liquidate those assets on their behalf. The proceeds of that liquidation go into the account. And then the second part is invest. So now that you've contributed, you invest, recommend an investment strategy among several different options that we offer with the goal of hoping that the assets will grow over the time that they're actually in the account. And then finally, the third part is grant, where when you're ready, it's not an immediate need, but you can grant immediately or you can grant over time or do a combination of both. You simply identify the charity that you want to support, your house of worship, your alma mater, a particular organization that supports a cause that you're passionate about, click recommend a grant where you'd like it to go, what you'd like it to support, and off it goes.

A (5:34)

Now, the cool thing about this is I think when Donor advised funds first kicked off, they were seen as something for rich people. I can't sort of bang home loud enough that this is not just some rich person thing because tell us a little bit about, like what you've seen in the growth of these funds. It's not just the wealthiest wealthy. You know, you don't have to have a billion dollars to do this. It's actually really great for people who don't have that kind of money, who don't have their own private foundation. So what are the kinds of people that you guys have been seeing use these accounts?

B (6:08)

Such a great point. And people do have that misperception that, you know, these accounts are only set up for people with huge amounts of wealth and resources to sort of help them fulfill their charitable giving goals. And that's not at all the case. First of all, there's no minimum to open an account. You can open it with a dollar, or you can open it at a zero balance and then fund it in a way that is, you know, consistent with what your goals are and when your resources are available. The whole goal with this account is to make charitable giving easier for everybody. Our mission as an organization is to increase charitable giving in the United States. And how do we do that? We do that by providing a really low cost, highly efficient, tax smart solution for really anybody to sort of consolidate their charitable giving in a way where it's going to maximize the impact when they actually grant it to charity. We have people with lots and lots of resources who have lots of means and are really active with their charitable giving. And we have people that are of modest means and they do it together with family members where they use their accounts. For example, at the end of the year they have a particular charitable cause they want to support, and then they bring in their children and they say, what do you want to support and why and how and research a charity for us as part of sort of your, you know, the holiday that we celebrate together as a family so that we can give and sort of instill and create that approach to and commitment to giving back as much as we do, to taking on and, you know, it really runs the gamut. We have very, very small accounts, we have individual accounts, those that are for families. And then we have very significant accounts from individuals, as I said, which have significant means and have a true commitment to not only charitable giving, but to doing it right, where they're getting the most possible impact to the charities and causes that they really want to support.

A (7:54)

You know, I think what's interesting Is that oftentimes we'll have people come on the air and they'll talk about having you know, a slug. And they're lucky, right? This is not everybody. They have a slug of company stock, they've got a slug of Nvidia which they thankfully bought at the right time and made some money. And so often it's very humorous to me because I think it's silly but they oh, I don't want to pay the tax on this. Can you explain the mechanism of gifting a highly appreciated security into a donor advised fund? Like what happens tax wise for that person?

B (8:32)

Lots and lots of our donors make gifts of appreciated non cash assets like publicly traded stock for example. You know, generally speaking they would grant where that's the biggest tax benefit is where as I said, it's appreciated, it's been held for a year or more. And they say okay, we, I have a significant position that I'd like to contribute a part of which I'd like to contribute. So they'll take whatever a certain position of Apple or as you say of Nvidia, whatever. And they contributed to the Del Rey by software. So the first thing is they don't have to think about selling it first and donating the postings. In fact, that's not what we would recommend. When they contributed to a donor advised bond like gap giving360, we liquidate the asset immediately on their behalf. So at the time that they contribute the stock, they receive an immediate fair market value deduction based on the value of that stock when it's contributing. And then we liquidate it, they don't. Which means that the capital gains exposure that they would otherwise have for liquidating it themselves is something they avoid as well. So that could be up to as much as 20% of the value of the stuff. And that means that the 20% that they would otherwise pay and get gains is now ultimately made available to the charity that they choose to support. So from a tax exposure perspective to the donor and you know, an ultimate resource availability to the charity, it's really win win on both sides.

A (9:53)

And by the way, I think that a lot of charities have done a good job incorporating donor advised funds. Really frictionless to give. So I just give the example that you know, in my own life, you know, I do this big charity ride bicycle ride and you know when you check out, it used to be I was like oh how am I going to use my donor advice fund now There are like little portals and boxes and you know, do you want to, if you if you want to go through Daft Giving 360, click here. And it's so much easier. That's such a win win, as you said. Also for the charity, it's like someone sitting in an event and they can just go to your app, click on the organization, and give the money, and it's sitting in a pooled account that you have created for yourself. I really, I just love that. I mean, I do think that the habit of philanthropy is one that is often learned. And it's much easier to do this if we make it easier on the person who is donating the money. Right.

B (11:00)

You are spot on. And I love what you just said, where, you know, the process of philanthropy is learned. You're right, it is. I mean, people, you know, are habitually, you know, inclined to say, oh, I'll just give cash or I'll write a check or I'll, you know, use my card. And it's a process like every other one. You know, you have to learn if you really want to achieve maximum impact. If you really want to help those charities and causes that are most meaningful to you now, and particularly now when you're seeing contraction in funding resources and things like that, it's important to be really thoughtful about how you do it. Likewise, these charities recognize that donors are demonstrating a commitment to them by utilizing a resource like the Donor Advice Fund. So they are making a very concerted and intentional to engage with us, to say, look, how do we, how do we partner together? How do we make our donors know that we happily and readily accept gifts from donor advice from them? How do we talk about, you know, the process for doing so? What type of, you know, what type of changes to our website can we do additions can we make to make that process as easy and painless as possible? Charities really have learned how to maximize the visibility of their engagement with our advised funds. And it really has had a significant impact on the bottom line, which is great to see.

A (12:16)

Gang, we're going to go and talk about some of the changes coming to tax law. Do not go to sleep. This is very interesting because there are some action items for this year, potentially this year, all the rules of taxes, same as they've been for the last couple of years. But next year there is going to be a change to the charitable giving rules. How do you feel, Fred, about explaining that but keeping everybody awake while you do it?

B (12:44)

I will give it my best shot. So for this year, you're absolutely right. For 2025, there really are no material changes, but you're absolutely right that starting in January of 2026, with the new tax law that's going to take effect, there are going to be changes that will potentially have an impact to how and what you give and associated tax benefits or consequences. When I'm asked what should high income earners know about maximizing their deduction this year, I would say many people in a position where they can give as much as possible, I would encourage them to consider doing it in 2025 because again, the current rules allow high income earners to deduct the cash gifts to charities up to 60% of the AGI and 30% for appreciated non cash assets. Those are in place for 2025. But with the changes in 2026 in the new tax law, it might be even more of a reason for folks to consider concentrating and maybe increasing the amount that they give. Now in 2025 before that takes place.

A (13:50)

A couple of things that I think are action items. You know, we're talking to you. It's like literally already the end of the year. I can't even believe it. But here's what I did. My wife and I looked at our charitable giving over the last few years and we projected forward the next few years and we just took a bunch of those stock market gains and pre funded our donor advised funds for the next few years. Because if the rules are changing, it's not bad. Listen, if you give money, you're going to get a deduction. It's fine. It's just going to be a little bit less of a deduction that you would have gotten next year than this year. It's not to say don't give money away next year. So I think action item number one is, hey, I can actually kind of put a slug of money in this year. What a great time to do it. A wonderful way to rebalance a portfolio is to take highly appreciated positions, get things back in line and no one's the wiser. Like you got it and you got your money to give away to charities in the future. You know, the idea of sort of navigating how to manage your own income, whether it's bunching so that you, you maybe can say, okay, well now I'll get to itemize. This is going to be great. This is especially helpful if you've had a great year in some other way. Maybe you got a big commission check and you're no longer going to be looking at, you're looking at a way to defray that by putting some money away for charity. Maybe you're no longer claiming the standard deduction because life's life changed for you. And there are all different ways that you can navigate this, but you got to pay attention.

B (15:26)

First of all, there's going to be imposed a new limit on a charitable deduction value. And this is for high income earners. So the tax savings from charitable deductions will be slightly capped. It would max out at about 35 cents on the dollar instead of 37. So what does that mean? This rule, it only affects taxpayers in the 37% tax bracket. And then the second thing, there is going to be a higher deduction floor for itemizers. Itemizers. So you'll need to Give more than 0.5% of your total adjusted gross income to even start claiming a deduction. So what does that mean? Smaller donations may no longer really have any impact on reducing your tax bill. So for example, like with an AGI of 200,000, total gifts must be more than $1,000 before being deductible, if that makes sense.

A (16:17)

Yeah.

B (16:18)

So yeah, it is getting a little bit more. We just have to be more mindful of a couple new nuances that are taking place with this bill that might complicate your giving a little bit.

A (16:27)

But you know, just as you said, I just want to reiterate to everybody, if you're a big philanthropist, whatever. I'm not saying big whatever. You give thousands and thousands of dollars a year away and that's something that's important to you, then some fraction of that, you will not get a tax break on some little fraction of that. That's it. Right. Everything else, you will. Frankly, using a donor advised fund can probably help you manage this a lot more easily than just doing it year to year and figuring out what happens next. You know, we get a ton of people who come on the program and they want to know about converting a traditional IRA to a Roth ira. So, you know, Mark and I are huge fans of the Roth. But you know, people get wigged out because the taxes do. Right. And you know, for a lot of folks, if, you know, you're in the 32 or the 35% bracket, that doesn't sound like a great thing that you have to like all of a sudden absorb this new tax liability. So can you explain how you think a donor advised fund can be used to help new minimize the tax hit of a conversion?

B (17:38)

There are some smart ways. You know, as you rightly point out, you can use charitable contributions to offset tax liabilities. One of which is doing a Roth IRA conversion so when you convert from a traditional IRA to a Roth at it, that amount gets taxed, it's subject to tax. But if you make a contribution, a charitable contribution, and you itemize, you can claim a deduction to ultimately reduce that tax exposure. You also don't have to donate the full amount. So hypothetical example, you might convert a million dollars from a traditional RIA to a Roth IRA and you might want to choose to give $250,000 to a charity or donor advised fund and still get a valuable deduction. But to fully offset that tax liability, you'd need to give the full amount. So my point is that that is a very smart strategy if you are in a position to theoretically create assets from a traditional IRA to a Roth. And there is a way for you to realize a tax benefit if you gift a portion of that converted amount. And a donor advised fund can be particularly helpful for that. To your point, right, you get the tax deduction now and you can take your time to decide which nonprofits to support. So again, I want to point out that you receive the tax benefit for any contribution that goes into a donor advised fund at the time the contribution is made. But it also is the assets are then put in the account and invested, hopefully for growth over time. If you have a long term charitable goal, you don't have to feel pressured to get those dollars granted out to the charities immediately, but you can grant them out over time, Whatever, whatever amount of time works best for you. It could be immediate, it could be in a month, it could be over a period of quarters, years, whatever. So it's, it's a very, very effective mechanism for when people have these assets available for charity, but they're not sure exactly where they want it to go quite yet.

A (19:33)

Now I was, I was under the, the impression that we're kind of waiting to see if the IRS was going to give us some limitation on how long funds could live in a donor advised fund and whether there was going to be some sort of decision or ruling that, you know, gosh, you can put the money in, but it can't be there, you know, ad infinitum. Has there been any change in that? Do you know?

B (19:57)

There's been deep discussions among all of the donor advised funds out there today to really implement what is a best practice. First, I want to tell you that the amount that goes out from donor advised funds is exceptionally high relative to other vehicles. We here at Daeding 360 have a policy where if an account goes dormant for a period of time, we reach out to the donor, we tell them, you haven't made a grant in this amount of time and you have to do so in order to keep your account current and active. And if we still don't hear from them, we actually say we will make a grant to a charity based on the way you've granted before to ensure that that account remains active. And so all of us take a concerted effort and a sort of a proactive approach to ensuring that funds aren't simply sitting in an account not being granted to charity. That's not the purpose of this solution. The purpose of the solution is really to make the process as efficient and streamlined as possible. We as an industry, we as the360, take very seriously our commitment to ensuring that these funds are granted to charity, which is their intent. And in terms of your other question about regulatory activities, we are in discussions all the time with a variety of different organizations to ensure that they understand everything that we are doing in a daft sector to get those dollars out to charities in a meaningful and active way while still sort of preserving the wishes of our donors who may have both short and long term goals.

A (21:27)

You know, I think that's a great point. We often will have. One of our favorite guests is Ed Slott and he talks a lot about, you know, iras and Roths, and we talk about donor advised funds and we also talk about qualified charitable distributions. And he used to say that one of the funny things that he would have these conversations when he was doing taxes for people when he was in the business, and he would talk about charitable giving. And he says, now what I learned is that you can't convince somebody to be charitable. You know, it's not a tax decision. They want to give money away. They're still giving away their money regardless of the actual implication on their tax returns. And it's going outside of their families. And so it has to be something that you care about. Obviously, you know, we talked about putting cash in the account, which is a dumb thing to do. You should always put appreciated asset. But you can do, you can accept In a Daft Giving360 account, you can accept crypto and real estate.

B (22:21)

We can accept all kinds of things. It's, you know, one of the things that we embrace as a priority is a process for helping donors give a variety of different kinds of assets. We have accepted over the course of the time that I've been here. Dirt grain, Lamborghinis. Lamborghinis, a partial interest in an NFL, skis, quarter horses. It's pretty remarkable the breadth of contributions that we've received. So yes, we do. And we either do it directly or we do it through a third party with which we work on an ongoing basis. With those types of contributions that are a little bit more complex, that's one of the best, I think elements of our solution is in our ability to offer flexibility to our donors in terms of what they want to contribute. It's something that we take a great deal of pride in and do very well.

A (23:13)

Wait, I just want to just underscore this. That's not every donor advised fund that's deaf giving360 that will accept that because there are certain, I think still there are certain donor advised funds that won't accept those kinds of assets. Is that right?

B (23:27)

There are certain types of assets that are more difficult to accept than others. I can't speak necessarily to what, you know, the other donor advice funds.

A (23:35)

Yes, of course.

B (23:37)

And what I can say is that in our particular case, we do everything possible to accommodate the needs of our donors. And if we can't do it directly, we engage with a third party that we've worked with for many, many years to see if we can do it through them.

A (23:52)

Okay, so this is the best thing since sliced bread. I guess that what I'd like to do in finishing up with you is to maybe have a conversation a little bit about the fact that this platform daft giving 360, you know, you are promoting charities. You also do some research. In other words, it's not like Joe's philanthropy. Charity might may not be on your list. Do you not vet. But a charity has to be available. And like it's almost like there's one level of you guys sussing out charities if they're actually on the platform. Is that right?

B (24:31)

Generally speaking, what we rely on as our as many donor advice funds do is there is a database of 501 C3 charities, nonprofit organizations that are approved and in good standing with the IRS. And that database, at least in ours, is about 2 million strong. So generally speaking, if the organization, as I said, is a 501C3 in good standing with the IRS and there are no sort of active investigations, either the federal or the state's attorney general levels related to their use of charitable dollars, questioning for example, that those dollars are not being used for charitable purposes, if there's no investigation and they're in good standing with the irs, generally speaking, we will honor a recommendation for a grant to that charity. Now, we also have a very rigorous due diligence process. And whenever a charity is in question, if there is such an investigation or there is something that would suggest that perhaps it's not going to charitable needs, we evaluate those organizations very carefully because we want to make sure it's important for us that the integrity of our solution is is intact. And the integrity means that we won't allow our solution to be used for other than charitable purposes. And it's our responsibility to make sure that that doesn't happen. So we have a very structured and intense due diligence process. Whenever we learn that there's a challenge or an issue with the clarity, we evaluate it and determine as a group whether it's something that we should flag for monitoring in the future future or suspend the outcome of a investigation. But to your question, generally speaking, our goal is to make it as easy it is for donors to contribute. We want to make it as easy as possible for them to grant to the charities that they choose to support.

A (26:26)

If you've got a question about how to use a donor advised fund for you, for your family, if you've got ideas about it, if you have one and you're not sure you're using it in the right way, go to our website jillonmoney.com click the contact Us button, write us a note. And please, if you're not going to come on the air live, give us a lot of detail. If you are going to come on the air live, check the box. Mark will do everything else. As you heard in this interview, I think donor advised funds are incredible. What a powerful tool. And I hope that everyone listening at least starts thinking about it. Because if you are charitably inclined, this is the the way to go for most of you. All right, that's it. I'm going to start blathering on about this. Don't forget you can sign up for our free weekly newsletter comes out every Friday. Hey, that's today, which is kind of cool. And because it is Friday, we always like to do our thank yous. Our music is composed by Joel Goodman. Mark Tellersio is our executive producer and king of all things web and we are distributed by the fine folks at Odyssey. Don't forget you can subscribe to us on the Odyssey app or wherever you find your print favorite podcast. Try to lift someone up. Change your work, change your wealth, change your life. Thank you for listening and we will talk to you on Monday. Introducing Fidelity Trader Plus.

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