Wednesday, May 23, 2012


Pathways Advisory Group, Inc.
Jeff Karst, Associate Planner

Last week I wrote about Donor Advised Funds. One of the reasons for using a DAF can be that you have not decided which charities to donate to. If you find yourself researching charities, a great web resource is CharityNavigator. Although it’s only part of the story, CharityNavigator provides a helpful ranking of public charities based on their financial accounting and transparency.

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Wednesday, May 16, 2012

Donor Advised Funds

Pathways Advisory Group, Inc
Jeff Karst, Associate Planner

A Donor Advised Fund (DAF) is a complex charitable planning vehicle. Some call it the “poor” man’s Private Foundation. The fund is setup with a qualified DAF company. A donor makes a (potentially) tax-deductible donation to the fund. There is typically a minimum initial donation (the range is $10,000 - $250,000). Although a tax deduction is received in the year the money is donated to the fund, the timetable for distributing funds to charities is flexible. The DAF monies can be invested for the long-term, with periodic liquidations to accommodate distribution requests. While a donor to the DAF can only request a distribution to a specified charity, refusal of a request is quite rare.
Why would someone want to establish a DAF?
  • You may want a big tax deduction in a single year due to abnormal income (ie. selling a business).
  • You have not decided which charities you would like to donate to but you are comfortable making an irrevocable commitment to charitable causes.
  • You want your heirs to be involved. Directing the DAF “grants” can pass to the next generation. They can continue to invest and request distributions for specific charities.
A Donor Advised Fund is a charitable/income tax/estate tax planning tool that could be used in a variety of ways. There is no way to cover all the complexities in this post. If you would like more information or would like to discuss how this might integrate with your financial plan, please let us know.

Monday, May 7, 2012

Tax Form 5498

Have you received a tax form in the mail recently? If not, then disregard this post. If, however, you did receive a 2011 IRS Tax Form 5498 recently, do not panic. Form 5498 is generated by investment custodians every May for Traditional or Roth IRAs with activity during the previous tax year and usually does not lead to an amended tax filing. Tax Form 5498 is informational. The IRS reconciles this activity with your Tax Return. If you received this form, ask yourself: Did I contribute to a Roth or Traditional IRA last year? Did I roll money into an IRA last year? Did I convert IRA money to a Roth IRA last year? If any of this activity applies to you, you received Form 5498. Contribution information is typically requested on an accountant's questionnaire. Rollovers and conversions generate a 1099-R. Either way, your accountant should already be aware of the activity. Then what should I do with my copy? In most cases, simply add it to your freshly started tax folder for 2012. As your accountant reviews next year's tax file, he or she can confirm that the activity was addressed.

The above explanation is summarized and generic. Please consult your tax professional with any specific questions.