CSQ ADVISOR
Joseph Teurlings &
Steven Carmandalian
Managing Partner, Seton & Assoc.
Joseph Teurlings was born and raised in The Netherlands where he obtained a Master’s Degree in Business Administration (MBA). Mr. Teurlings is a CERTIFIED FINANCIAL PLANNER practitioner. He holds the prestigious Chartered Financial Analyst (CFA®) as well as the Certified Investment Management Analyst (CIMA®) designation. Mr. Teurlings is fluent in English, Dutch, German and French.
Steven Carmandalian brings more than a decade of industry experience to Moneta Wealth Management. He provides sophisticated knowledge and experience in the areas most critical to clients, including comprehensive wealth planning, asset allocation, investment strategy, and portfolio construction. Steven holds a Bachelors of Science in Finance from California State University, Northridge, as well as the prestigious Certified Investment Management Analyst CIMA®, through the Wharton School of Business.
818/874.2751
joseph.teurlings@ubs.com
steven.carmandalian@ubs.com
Working Together
Donor advised funds and private foundations
If you are interested in creating a legacy, feel strongly about a cause or giving back to the community, or want to pass on a tradition of giving to your children and grandchildren, then a Donor Advised Fund (DAF) may be just the thing for you.
In most instances, people who are contemplating establishing a philanthropic giving program are advised to create either a private foundation or a donor advised fund. In some instances, one of those structures may be preferable to the other, but they are not mutually exclusive, and many donors who already have a private foundation should consider establishing a donor advised fund (DAF) as well.
Several situations outlined below illustrate how donor advised funds and private foundations can complement each other and serve as important tools for family philanthropy
Succession Planning
Families with foundations quite often create a donor advised fund account as a training vehicle for the next generation. These “junior advisors” can learn firsthand about managing a giving vehicle. It also has a benefit of bridging the gap between generations.
Situation: A married couple established a family foundation 20 years ago. As they aged, they became concerned about the ability of their children, who had just graduated college, to control the foundation and continue their strategic philanthropy. Their financial advisor recommended that a donor advised fund be established for each child, who would act as a “junior advisor” for the fund. They would present their granting decisions and process to the family foundation board. By having responsibility and learning first hand, they became stakeholders in the family philanthropy while gaining valuable foundation experience for eventually taking an active role in the family foundation.
Private Foundation Annual Giving Requirement
Private foundations must make grants of 5% of their net asset value every year, regardless of how much the assets earn.
Situation: At year-end, a private foundation was still doing due diligence on several possible grant recipients. Since it would take several months to reach a final decision, the foundation would not meet the annual giving requirement for the year. However, it could grant the required distribution to the family’s donor advised fund. Without the constraints of year-end pressure, the family could determine at its own pace which charities would ultimately receive grants. Some foundations even set up an automated distribution of the required 5% amount to the family’s donor advised fund to ensure that no deadlines are missed.
Private foundations are charitable entities formed, funded, and run by individuals or families for the exclusive purpose of distributing assets to charitable causes. In general, private foundations are administered and controlled by trustees or a board—typically members of the family and trusted advisors selected
by the donor.
Providing an Alternative
It’s clear that donor advised funds can complement a private foundation. However, there are some cases where a donor advised fund may simply be preferable to a private foundation. Because a donor advised fund shares many of the characteristics of a private foundation, such as tax-deductible gifts to charitable organizations and involving family members in philanthropy, a donor advised fund can sometimes take the place of a small private foundation for families who are seeking a less burdensome solution. The donor advised fund can even carry the name of the foundation to preserve the same legacy.
Situation: A couple operated a small private foundation for many years but decided that the work involved was becoming more than they could handle. Their financial advisor recommended granting out the private foundation’s assets to a donor advised fund. Through a DAF their costs would be reduced and they would save time as tax filings, grant processing, and other legal and administrative responsibilities were handled by the DAF. Also, the DAF receives the highest tax deduction for future gifts - even real estate. The DAF is also not required to make a 5% annual distribution.
While donor advised funds offer many benefits, they also offer donors less control than private foundations. Therefore, any decision to transfer all assets from a private foundation to a donor advised fund should involve your tax and legal advisors.
UBS Financial Services Inc. does not give tax or legal advice. You should consult with your attorney or tax advisor regarding your specific situation. This material is not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or tax-related matter(s).
UBS Financial Services Inc., This article has been written and approved by UBS Financial Services, Inc. for use by its Financial Advisors.
