This post was authored by Salvatore M. Capizzi, Dunham's Chief Sales & Marketing Officer. If you have questions concerning today's topic, please call us at (858) 964 - 0500. Hold us to higher standards.

Reaching philanthropic goals is different for every family and often is combined with specific financial goals they seek to achieve. Some focus on alleviating significant tax situations they may find themselves in. Some may need to replace the income of an asset they are selling, like their business or real estate. Others may seek a way to have their children avoid the hefty SECURE Act tax when their children inherit their IRA.

However, the philanthropic-minded have the desire to maximize their effect on causes and charities that are dear to them. They also want to leave a positive impact for their family to follow. Two charitable strategies that work exceptionally well together are a type of trust called a charitable remainder trust and an account used explicitly for charitable giving called a donor-advised fund.

Combined, they can help a worthy cause, leave a positive impact for their family to follow, and satisfy distinct financial goals they want to accomplish. Let us examine what they are and how they can work together.

Combining Two Powerful Gifting Strategies: The Charitable Remainder Trust and the Dunham Donor-Advised Fund

What is a Charitable Remainder Trust?

A charitable remainder trust is generally used when you are selling a highly appreciated asset like publicly traded stocks, business, real estate, or cryptocurrencies, to name a few. Instead of selling the investment and paying a high capital gains tax, you transfer the asset into the charitable remainder trust and have the trust sell it.

Since, in the eyes of the IRS, the trust is a tax-exempt entity, you can eliminate the capital gains tax at the point of sale.

When you establish this trust, you select an income beneficiary who will receive a stream of income from the trust for a set number of years or for their lifetime. The income beneficiary can be you and your spouse. If you are using this trust to eliminate the SECURE Act tax to provide more income for your children when they inherit your IRA, the income beneficiary could be your children.

After naming the income beneficiary, you also name a charity that will receive whatever remains in the trust after the income beneficiary passes away, creating a charitable gift. This charity is known as the remainder beneficiary as it receives whatever remained in the trust after the income beneficiary passes away.

Because there will be a gift made to charity, the IRS gives you an immediate tax deduction that you can use towards other income when the trust is funded.

What is a Donor-Advised Fund?

A donor-advised fund, like the Dunham Donor-Advised Fund, is an account that is at a nonprofit sponsoring organization (DAF host) that allows you to make a charitable contribution to the fund and receive an immediate tax deduction. You then decide what charities you want to support and when you want to make the contribution. The fund handles all of the administrative details, and your financial advisor manages the investments. This means you and your family can focus on giving.

Naming a Donor-Advised Fund as the Charity for your Charitable Remainder Trust

By combining these two powerful strategies, you create many benefits. One of the benefits is that it eases the pressures of deciding who the ultimate charity or charities should be when the trust is established.

Remember, the money will go to the charity only when the income beneficiary passes away, which could be many decades into the future.

Not only can you use the Dunham Donor-Advised Fund as the remainder beneficiary of your charitable remainder trust, but you can also utilize the fund as the vehicle you and your family will use outside of the trust for charitable gifts made during your lifetime. This creates ease and convenience.

Additionally, it also allows your family to stay involved long after the income beneficiary passes away. Suppose you were the income beneficiary of the charitable remainder trust. By naming the Dunham Donor-Advised Fund as the remainder beneficiary, you  leave a positive impact for your family to follow by empowering multiple generations to give to the causes they care about.

Find out how the Dunham Donor-Advised Fund can help you leave a positive impact for your family to follow by clicking the button below.

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DAF Disclosures:

This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.

Federal and state laws and regulations are complex and subject to change, which can materially impact your results. Charitable deductions at the federal level are available only if you itemize deductions. Rules and regulations regarding tax deductions for charitable giving vary at the state level, and laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy or completeness of the information provided. Dunham Associates & Investment Counsel, Inc. (“Dunham”) cannot guarantee that such information is accurate, complete or timely; and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.  Always consult an attorney or tax professional regarding your specific legal or tax situation.

All financial decisions and investments involve risk, including possible loss of principal. The market value of the Dunham Donor Advised Fund (“Dunham DAF”) is not guaranteed by UI and may fluctuate depending upon investment results.

Investors should carefully consider a fund’s investment goals, risks, sales charges and expenses before investing. The prospectus contains this and other information. Please read the prospectus carefully before investing or sending money.

A donor advised fund (“DAF”) is a separately identified account that is maintained and operated by a section 501(c)(3) organization, and is not a registered investment company.

The Dunham DAF is powered by University Impact (“UI”), a registered 501(c)(3) nonprofit in the United States who manages the charitable aspects of the Dunham DAF.

UI charges fees to the Dunham DAF for administrative services in accordance with the Fee Schedule as outlined in Appendix A of the UI Donor Advised Fund Agreement (“Agreement”). Accounts are required to maintain a $1,000 minimum balance and are subject to support investment fees as explained in the Agreement. A list of current fees and initial gift minimums is available upon request. UI reserves the right to change its fee or minimum policies at any time. There may be additional fees charged by the Financial Advisor that is separate from UI’s administrative and impact investment fees.

Contributions to the Dunham DAF are irrevocable contributions made to UI, a public charity.

Assets contributed to the Dunham DAF (once liquidated, if applicable) will be invested in the Dunham Asset Allocation Program sponsored by Dunham.  Investment allocations may be changed according to Dunham’s standard policies and procedures.  UI may hold up to 5% of the Dunham DAF assets in non-interest bearing cash at any time.

As the Program Sponsor, Dunham charges each donor a single service program fee (“Program Fee”) not exceeding 0.25%.

In addition, a Financial Advisor may charge a client/donor an asset-based advisory fee (“Advisory Fee”) as specified in the Advisory Agreement. Detailed advisory and expense fee information about the Dunham Asset Allocation Program is available in the Wrap Fee Program Brochure available upon request.

As investment adviser to the Dunham Funds, Dunham receives the investment advisory compensation described in the Dunham Funds’ prospectuses and such fees are borne by all shareholders in the Dunham Funds, including the donor.

Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.