Ep. 03 – Donor Advised Fund as a Family Mission Fund

Brighter Wealth Giving

Intro about the episode:

Hi everyone and welcome to the Brighter Retirement Radio™ Podcast. Selling an appreciated asset like a rental home and putting the cash into a Donor Advised Fund (DAF) can create a massive tax benefit as well as create a perpetual giving account for your family. This is exactly what the Dastrup family was able to accomplish. Charitable giving and service has been a core desire of this family for generations and now with the creation of this Donor Advised Fund they will be able to fund many service missions for themselves and their grandchildren for many years to come.

 

>> Devin Peterson: (00:00)

Devin introduces this week’s guest, Amelia Carbine. He also explains the goal of this weeks podcast which is to understand what a donor advised fund is and more particularly how a donor advised fund can be used as a way of either perpetual giving or how to use it for a mission fund

>>Amelia Carbine: (00:50)

Amelia starts by describing her parents and their background. She explains her dad was pioneer stock. He was born and bred in Utah. He was a good Mormon boy or part of the LDS or Church of Jesus Christ of Latter-Day Saints. He was always taught by his parents who had 15 kids. He was one of 15. She explains that he has a really strong work ethic. He has always been all about working hard, serving others and doing the best you can. She explains that her mom is from a little Island called Bermuda. She had an almost opposite life than her dad. Her mom’s life was all about playing in the ocean and running and having fun. Both parents are lovers of music. Her mom had a family band when she was young. They all played guitars. They made a record and everything. Her dad played an instrument in high school. All of his siblings were very musically inclined but overall they’re just really good down to earth, awesome people that just love to serve others. And love to work hard.

>>Devin Peterson: (02:28)

Devin thanks Amelia or sharing and explains that the core of his podcast and this podcast episode conversation is about giving mentality. The idea that it’s more important to give than to get. He then asks Amelia about her siblings.

>>Amelia Carbine: (02:59)

Amelia explains she is one of seven. She is number four of seven so right in the middle. She states her siblings are all great people too. They all have the same service-oriented mentality as her parents. She explains her dad taught them that really well. He would work them pretty hard when we were kids and taught her and her siblings that same work ethic. You work until it’s done.

>>Devin Peterson: (03:43)

Devin asks how many grandkids Amelia’s mom and dad have.

>>Amelia Carbine: (03:52)

Amelia states her sister-in-law had a baby a few weeks ago so there are now 33 grandchildren.

>>Devin Peterson: (04:10)

Devin explains that they will not start talking about charitable giving and how Amelia’s parents have really shown up differently in this last year with the donor advised fund and asks Amelia to give us a little bit of a background of the mentality of her mom and dad around charitable giving.

>>Amelia Carbine: (04:27)

Amelia explains that her parents are always thinking of ways that they can help others and serve others.  Amelia’s mom grew up in a different religion and converted to LDS. All growing up they just always had a role to play in helping those around them. But, they, when, you know, in growing up they wanted to teach us those same principles. My dad was really kind of fun. When she  was a teenager she didn’t think it was fun but they formed a family band. Her parents had that same love for music. Her parents had them get their instruments together. They transposed music and playing together. Her dad decided one time that it was going to be this awesome thing to go around and sing happy birthday to those in the area that were less involved and to the older people that don’t get out much. So they went to sing happy birthday to those people and take them cakes and just little things like that. She explains her dad was always thinking of ways that they could go and do service for others. Amelia doesn’t remember a time that her dad wasn’t coming up with some crazy idea of how to help somebody. When she was a teenager, it was so embarrassing, but now she sees the value of it wants to take her teenagers and do the same things.

>>Devin Peterson: (06:30)

Devin explains that it is amazing to hear about Amelia’s father and her parents in general because in a retirement planning podcast like this a lot of times they talk about just the dollars and the cents. Can we save less? Can we save more? Could we spend less for retirement? But a lot of times it’s not about the dollars and the cents. It’s about the heart that has given you value in retirement. So for Amelia’s dad, it wasn’t only about being able to make a charitable donation to get a tax deduction, but this is outside of the dollars. This is putting together a family orchestra to lift others’ spirits and spread a little cheer and stuff.

>>Amelia Carbine: (07:16)

Amelia explains that most people with seven kids don’t have money to throw to charities so they found different ways to serve and help people.

>>Devin Peterson: (07:30)

Devin states the core of today’s conversation is surrounding this financial vehicle called a Donor Advised Fund. He explains what it is and asks for Amelia’s feedback and experience on how her mom and dad came to discover that and how did they decided that that would be a good giving vehicle for them. A donor advised fund is essentially your own private foundation or charitable fund that you can donate at one point in time and get the full tax deduction in that one year and then invest that in an inappropriate way that fits your needs, whether that’s leaving in cash or money market or CD or investments, stocks, bonds, mutual funds, it can grow over time. All, not only tax deferred but tax free because you’ve already gained the economic benefit of writing that off on your taxes. It’s now separate from your personal and financial and family finances. As it grows, tax free, at a future date in time, you can use that fund to make charitable contributions as you and your family see fit. Devin asks Amelia, “How did they come across a donor advised fund and how do they make that decision for them?”

>>Amelia Carbine: (09:00)

Amelia explains how she got introduced to a donor advised fund. She states she was working for Devin and went to a few of his classes and he spoke about a donor advised fund. Around the same time, her dad mentioned wanting to go and serve on a mission.

>>Amelia Carbine: (09:59)

Amelia explains that her parents had already served a couple of missions, but wanted to be able to do another one. And, in figuring out how they were going to fund this mission, they decided they were going to sell one of their rental properties. She remembers her dad talking about how he was not thrilled about the idea of selling that rental property and having all of that capital gains tax. She goes on to say that in the class she went to Devin brought up the donor advised fund, and she knew this was the answer for her parents.

>>Amelia Carbine: (10:50)

Amelia talked to her dad that day and said the donor advised fund could be a really good answer for you. The fund and money can be used because her dad was planning on using it for charitable purposes anyway, that he could take this money, put it into a donor advised fund and he won’t have to pay those capital gains taxes that he would have to pay otherwise.

>>Devin Peterson: (11:17)

Devin states he is grateful that Amelia saw a need to fill a need. Devin explains the concept of a donor advised fund is actually not very well known. Devin explains a lot of times the idea of opening your own private foundation make people think of Bill and Melinda Gates and others that have hundreds of millions of dollars or hundreds of billions of dollars just to throw towards some charitable causes. That’s actually not the case. It always does not have to be the high net worth individual that qualifies or is a good fit for a donor advised fund. Devin explains a traditional foundation, in the traditional sense, that we think of it is an old instrument that people use for charitable giving. But inside of that old format, there’s a lot of fees and management fees and administration fees there. However, this donor advised fund has a lot less fees, and it’s a lot more simple to use. The minimums are anywhere from $5,000 to $50,000 to open up that type of account. And so it’s a lot more attainable than $5 million or $50 million. Does that make sense? After explaining more about a donor advised fund, Devin asks Amelia what happened after they became aware of a donor advised fund.

>>Amelia Carbine: (12:48)

Amelia says she scheduled an appointment for them to meet with Devin. Devin explained to them how a donor advised fund works. She then helped get all the paperwork done and get that all set up so that they could have that fund open. Her parents sold their home and took the funds that they needed to put into that fund. She explains they also funded it through a TD Ameritrade.

>>Devin Peterson: (13:42)

Devin states he wants to learn more about the decision making process for deciding to get a donor advised fund. For Amelia’s parents, once they were aware of that type of instrument, they had to figure out if this will work for them as an individual or as a household, does this make sense and how much does it make sense? Her parents went to speak with Devin, and they had a conversation about their individual tax returns and where it might fit, the amount that they’re selling their house for, what the cost basis of the house was, how much they might have to pay in longterm capital gains.

>>Devin Peterson: (14:36)

Devin explains they actually went to Amelia’s parents’ CPA and talked through that type of donation from the strictly tax perspective. They wanted a second pair of eyes to be able to look at that strategy and say, as a CPA, I know all their numbers and here’s actually how it would pan out. With all of the information, not only from an advisor but also from their trusted CPA, they were all as a team able to come down to a conclusion and say, this is the type of impact that it would have and here’s the amount that we recommend that her parents put into that fund.

>>Devin Peterson: (15:26)

Devin advises there’s so much value that can be had as you look into the details and knowledge is power. In Amelia’s parents’ case, that knowledge was very powerful as her parents saved quite a bit of those longterm capital gains. So from a tax perspective, it was a win. Devin explains that absolutely there’s an economic win with putting together a donor advised fund when it’s a good fit. He explains there’s an emotional win for sure as well. Devin asks Amelia to share some more on how the emotional benefit has affected her parents. He mentions that her parents’ fund is with TD Ameritrade and they invested in some stocks and some bonds. Devin states It’s actually at the American Endowment Foundation, which is the donor advised fund custodian or manager that they use.

>>Amelia Carbine: (16:32)

Amelia explains that regarding the emotional benefit her dad is just like over the moon about the whole thing. Every time she talks to him he talks about how many missions he can pay for and how many missions he can take his grandkids on. She says that he is so excited that its tradition in their family and in their church to serve a mission and all of these kids will be able to do that.

>>Devin Peterson: (17:16)

Devin asks Amelia to explain for the people that aren’t of The Church of Jesus Christ of Latter-Day Saints, what does a mission look like in Amelia’s family?

>>Amelia Carbine: (17:26)

Amelia explains that when you’re young and pretty close to adults, 18 and 19, a young man can go on a mission. They serve two years and the church decides where to send them. She says it’s just kind of fun to send in your application and your papers to see where you’re going to be sent. You then go and you serve. A missionary will teach the gospel of Jesus Christ. They also do service for others. That’s a standard mission. Young women can also serve a mission. When they turn 19, they can go and serve an 18-month mission. It’s just a chance for them to serve their Lord and serve other people.

>>Devin Peterson: (18:35)

Devin says in his mind, he is seeing Amelia’s dad excited now having all these grandkids with the family tradition of going out and serving and giving and growing themselves and as a grandfather, he wants to then see them learn a few things as they serve that. Amelia’s dad’s emotional benefit is now showing as he’s really excited to play a part in supporting his grandkids as they go out and serve. Devin asks Amelia, “What about your parents? Is there any opportunity for them to have that same benefit?”

>>Amelia Carbine: (19:11)

Amelia explains that the way that The Church of Jesus Christ of Latter-Day Saints has it set up, works really, really well with a donor advised fund. She states that not all missions can be paid for with a donor advised fund because the money can’t actually go into the hands of the person that’s serving or the person that owns the donor advised fund. She explains that they have it set up within the church that the church runs all of it. The money never goes into the hands of the people who are serving. So, her parents can take advantage of that because they can actually go and serve a mission. The church will fund everything that they need to have funded.

>>Devin Peterson: (20:38)

Devin explains that the LDS church receives those into a general mission fund and then supports them. But those dollars never go directly to Amelia’s parents which is why it works. He then states that her parents are on a mission now using the donor advised fund.

>>Amelia Carbine: (21:13)

Amelia says her parents are on a mission and left just a couple months ago and they are serving in Kirtland. There’s a church out there where they have a temple and they do tours of church history. Her parents are out there teaching people about the history of their church. She states they’ve done other missions. They went to Russia a few years ago and then they served a mission locally just a couple of years ago. She explains they’ve done a lot of missions, but this is the first one that they’ve been able to use that donor advised fund for.

>>Devin Peterson: (22:04)

Devin explains that he wished Amelia’s parents could be in the studio and on the podcast to talk about their experience but since they are away on a mission they couldn’t be there but thanked Amelia for sharing their story. He then tells Amelia he wants to talk more about how it all works. He explains that her parents have created this donor advised fund. They have had a onetime tax write off or itemized deduction in that year and then it continues to grow over time. They are currently donating or giving grants to support their mission funds. Devin asks Amelia to share a little bit about what it looks like to be able to connect the dots and make that kind of grant and donation.

>>Amelia Carbine: (23:16)

Amelia explains that she is the one that’s helping them set all of these things up because I am the one who got the funds working for them in the first place. Her parents asked her to be the one to set up the grants. Amelia says there’s a website through the American Endowment Foundation that’s really pretty user-friendly and you just go on and you recommend a grant. She says you have to actually make a recommendation. The grant or the foundation then looks it over and decides if that is an actual charitable thing that is allowed. They then grant it or they don’t grant that.

>>Devin Peterson: (24:21)

Devin explains that the reason why that’s beneficial is the American Endowment Foundation is there to make sure that Amelia’s parents are compliant to that type of account which is a huge advantage. Devin gives an example of how a family donates through a donor advised fund to support service missions. Devin’s example uses hurricane season and describes a large hurricane that comes through Florida or Texas. There’s always lots of charitable organizations that spring up. He explains you might not know if those are reputable or valid charitable institutions so if you were to send in a grant request and say, can you send X amount of dollars to X amount or X 501C-3 in Houston to help out with this hurricane, their job is actually to research that, make sure it’s a viable option and compliant, and then make that decision to do that grant, which is very valuable.

>>Amelia Carbine: (25:32)

Amelia states that they are very helpful and right there to watch for you and make sure you’re filling out the papers right too.

>>Amelia Carbine: (25:44)

Amelia sets up a monthly grant for her parents. She says every month there’s a new grant that will go to the church mission fund and then the church will use those funds how they see fit.

>>Devin Peterson: (26:07)

Devin asks Amelia, “So how does the church know that those funds were coming through and should be kind of counted on or credited towards your parents service?”

>>Amelia Carbine: (26:21)

Amelia explains that the LDS church is very organized. They have groups of congregations and they have a number for that and within each congregation they have units and an amount for each unit. The church will say we’re making a donation to this unit and then within that unit, they know who’s on a mission and who those funds are for. The church within that knows that they’ve received the funds from this unit and this is the person in this unit that is currently serving a mission and that’s who this money goes to.

>>Devin Peterson: (27:16)

Devin thanks Amelia for telling her parents story and asks her to share a couple of more things about what she feels as her family has gone through this experience as mom and dad have created this donor advised fund about what really excites them? What her parents shared with her siblings on how this might be used perpetually into the next generations? Anything else that she can share with him that has kind of excited her mom and dad and family about this?

>>Amelia Carbine: (28:00)

Amelia says her dad is most excited about the fact that this can be perpetual and it can help out his grandkids that need the help in paying for their missions and that once they’re done or anyone who wants to and has the ability to, can actually add back into this fund and they can just keep it going for generations. She says its an organization that they’ve set up within their family and even once her parents are gone it can go on to their kids and then they can pass it down to their kids. She said it’s also a good way to help teach that spirit of giving. Amelia says her dad is really excited about passing on that ability to learn that charitable thinking in a really cool way.

>>Devin Peterson: (29:24)

Devin explains that this generation is a great generation to instill the charitable giving mindset as they are sometimes known as the entitled generation. He asks Amelia, “What makes you come alive and what makes you stay relevant in your world?” which is the question asked of all the guests on the podcast.

>>Amelia Carbine: (30:49)

Amelia states that this is a pretty loaded question. In her own personal life, being a creator and creating something is her way of being relevant. Creating actual physical things, whether that be like crafting or just experiences for her family and people is what makes her feel relevant.

>>Devin Peterson: (31:38)

Devin thanks Amelia for sharing her family’s experience. He explains that from his perspective over the last several months, it’s been fun to see that kind of come to pass and have her parents create that opportunity and hear bits of feedback and comments that she’s made about how it’s made a difference and how it’s kind of excited her parents enjoyment and ability to give.

>>Amelia Carbine: (32:18)

Amelia thanks Devin for having her and giving her the opportunity to talk about it.