Impact of Tax Cuts and Jobs Act on DAFs and Charitable Giving

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One of the biggest benefits of attending the recent Heckerling conference was meeting with the leading estate planning attorneys and wealth advisors, and hearing about their conversations with clients about charitable giving and planning.

Many advisors told me that one of the biggest benefits of the 2017 Tax Cuts and Jobs Act was that last year, clients and their tax, legal, and financial advisors discussed charitable giving more than ever before. Clients wanted to understand the implications of the tax law changes. Consequently, because these conversations took place earlier than usual and throughout the year, more donor-advised fund (DAF) accounts were opened and funded sooner. The size of the accounts that were created and the additional donations to already-established accounts increased substantially. Christopher Hoyt, professor of law at the University of Missouri (Kansas City) School of Law, stated in his Heckerling presentation what many others have said, “This law was the best thing to happen to DAFs.”

Like many of the other leading DAF sponsors that recently released 2018 results, American Endowment Foundation (AEF) also experienced a significant increase in grants to charities, but AEF also was fortunate to have a big increase in the number of new DAF accounts and donations to both new and existing accounts.

I was party to many conversations about “bunching” donations, but the advisors who helped their clients establish DAFs at AEF did not just bunch and increase donations to exceed the new higher standard deduction of $24,000. “Bunching” refers to donating several years of donations at one time and taking a higher deduction in that year, and then not donating and taking the standard deduction in the other years. Even though clients may have initially read about and talked with their advisors about bunching and funding smaller DAFs, in the end they often created larger DAFs.