Donor-Advised Funds: A Smart Way to Give & Plan for Taxes
Many charitable individuals and families want to support the causes they care about while also being thoughtful about taxes and long-term financial planning. A Donor-Advised Fund (DAF) can be one of the most effective tools available to accomplish both goals.
A Donor-Advised Fund is a charitable giving account established with a sponsoring organization. Donors contribute cash, appreciated securities, or other eligible assets to the account, receive an immediate charitable tax deduction, and then recommend grants to qualified nonprofit organizations over time.
One of the biggest advantages of a DAF is the ability to separate the timing of a tax deduction from the timing of charitable gifts. For example, a donor may experience an unusually high-income year due to a business sale, large bonus, stock transaction, Roth conversion, or retirement plan distribution. By making a contribution to a Donor-Advised Fund during that year, the donor may be able to maximize a charitable deduction while taking additional time to decide which organizations should ultimately receive support.
Donor-Advised Funds can also be particularly valuable when donating appreciated investments. Rather than selling a stock or mutual fund position and paying capital gains tax, a donor may contribute the investment directly to the DAF. In many cases, the donor receives a charitable deduction based on the fair market value of the asset while avoiding the capital gains tax that would have been incurred if the investment had been sold first. This can result in more dollars available for charitable purposes.
Beyond the tax benefits, a DAF provides flexibility and simplicity. Instead of writing multiple charitable checks throughout the year and tracking receipts from numerous organizations, donors can make a single contribution to the DAF and distribute grants to various charities whenever desired. The sponsoring organization handles recordkeeping, reporting, and administration, making charitable giving more organized and efficient.
A Donor-Advised Fund can also serve as an excellent family legacy tool. Many families use DAFs to involve children and grandchildren in charitable decision-making. Family members can discuss community needs, evaluate charitable organizations, and work together to determine how grants should be distributed.
This process helps pass along both financial values and a spirit of generosity to future generations.
For nonprofit organizations, DAFs often create a more consistent source of support. Donors can contribute during high-income years and continue recommending grants for many years afterward.
This allows charities to benefit from ongoing philanthropic support while donors enjoy flexibility in their giving plans.
As you begin considering tax planning, individuals who are charitably inclined may want to consider whether a Donor-Advised Fund fits into their overall tax and estate planning strategy. While a DAF is not the right solution for everyone, it can be a powerful tool for individuals and families who wish to maximize the impact of their charitable giving while managing taxes in a thoughtful and efficient manner.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Nathan Wyatt for the Investment Service Center’s use.
**No strategy assures success or protects against loss.
Third-quarter earnings are expected to deliver another impressive headline, with S&P 500 aggregate net income growing 35% from a year ago, nearly three times its 10-year average. However, beneath the surface, the pace of growth varies considerably across the market.
As this week’s chart shows, earnings are expected to grow 13% after excluding the Technology and Energy sectors and three AI-related companies: Amazon in Consumer Discretionary and Alphabet and Meta in Communication Services. While that is well above the 8% average of the past decade, the widening gap highlights where the acceleration is coming from. Together, the excluded sectors and companies are expected to contribute nearly 77% of the increase in S&P 500 earnings this quarter.
Slower does not mean weak. In fact, analysts became more optimistic as the quarter progressed. Third-quarter earnings estimates increased 1.4% between June and September, compared with an average decline of more than 2% in a typical quarter. A record 72 companies also entered reporting season with guidance above consensus, suggesting the optimism is coming from companies as well as analysts.
For investors, the distinction between breadth and acceleration is important. Earnings growth has broadened well beyond a handful of companies, providing a healthier foundation for the market. However, the acceleration in profits remains concentrated in areas benefiting most from the AI investment cycle and stronger energy earnings. With valuations elevated, continued market gains may require both sides of the earnings story to hold: exceptional growth from the leaders and durable, above-trend growth from everyone else.
Chart of the Week: Source: FactSet, J.P. Morgan Asset Management.
Thought of the Week: Source: FactSet, J.P. Morgan Asset Management.
Abbreviations: Cons. Sent.: University of Michigan Consumer Sentiment Index; CPI: Consumer Price Index; EIA: Energy Information Agency; FHFA HPI: - Federal Housing Finance Authority House Price Index; FOMC: Federal Open Market Committee; GDP: gross domestic product; HPI: Home Price Index; HMI: Housing Market Index; ISM Mfg. Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally Adjusted Annual Rate
Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally
Adjusted Annual Rate
MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.
Bond Returns: All returns represent total return. Index: Bloomberg US Aggregate; provided by: Bloomberg Capital. Index: Bloomberg Investment Grade Credit; provided by: Bloomberg Capital. Index: Bloomberg Municipal Bond 10 Yr; provided by: Blomberg Capital. Index: Bloomberg Capital High Yield Index; provided by: Bloomberg Capital.
Key Interest Rates: 2 Year Treasury, FactSet; 10 Year Treasury, FactSet; 30 Year Treasury, FactSet; 10 Year German Bund, FactSet. 3 Month LIBOR, British Bankers’ Association; 3 Month EURIBOR, European Banking Federation; 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve.
Commodities: Gold, FactSet; Crude Oil (WTI), FactSet; Gasoline, FactSet; Natural Gas, FactSet; Silver, FactSet; Copper, FactSet; Corn, FactSet. Bloomberg Commodity Index (BBG Idx), Bloomberg Finance L.P.
information from FactSet's Pricing database as provided by MSCI. Russell 1000 Value Index,
Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the reinvestment of dividends. The Index used from L to R,
top to bottom are: Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-to book ratios and lower forecasted growth values), S&P 500 Index (Index represents the 500 Large Cap portion of the stock market, and
is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures
the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth values).
Past performance does not guarantee future results.
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