Ask an Expert: The Tulane Donor-Advised Fund

John Rogers is an institutional consultant and investing with impact director for Graystone Consulting, which is a business of Morgan Stanley. Tulane has partnered with Morgan Stanley Global Impact Funding Trust (Morgan Stanley GIFT) to offer Tulane alumni and friends the opportunity to take advantage of the flexibility of the Tulane Donor-Advised Fund to support everything they love about the university. A donor-advised fund (DAF) is a charitable investment account that gives donors an immediate tax benefit when they set it up. The funds grow tax-free while donors decide their philanthropic strategy. Rogers shared his expertise about the benefits of the Tulane Donor-Advised Fund.

Q. Could you tell me about your role as an institutional consultant and investing with impact director?

A. Graystone is Morgan Stanley’s institutional wealth management business, so we work with foundations, endowments, nonprofits and corporations. I work primarily with foundations and endowments to help them with investment plans and planned giving resources.

Q. Could you explain what the Tulane Donor-Advised Fund is to someone who might not be familiar with it?

A. When you’re managing a donor-advised fund, there is a lot of complexity — with the administration, with the investments — and Morgan Stanley GIFT basically creates the opportunity for nonprofits like Tulane to offer their donors a donor-advised fund with our engine powering the administration and investment operations. So, donors write checks to Tulane. When they log in to the portal, they see Tulane’s colors. Everything, for all intents and purposes, is Tulane’s donor-advised fund, but the money actually resides in Morgan Stanley GIFT while it’s waiting to be granted.

Q. What are some benefits of giving through the Tulane Donor-Advised Fund?

A. Number one, the opportunities for Tulane. When you go through the Tulane program, it’s with the understanding that ultimately, over time, a large portion of the assets will support Tulane. So, somebody would definitely want to have an affinity for Tulane if they choose to use the Tulane Donor-Advised Fund.

The other benefit is you can support organizations outside of Tulane. Donor-advised funds are like a parking space for your donation. You get all the tax benefits of making a donation all at once, whether that’s a gift of cash, securities, property or art, but you have time to spread out your donations and have a legacy planning tool as well.

Q. What are some of the tax benefits of giving through the Tulane Donor-Advised Fund?

A. DAFs offer several important advantages. Because the DAF sponsor, Morgan Stanley GIFT, is a public charity, you’ll receive the full tax benefit (annual income tax deduction limits for gifts to public charities, including donor-advised funds, are 30 percent of adjusted gross income [AGI] for contributions of non-cash assets held more than one year or 60 percent of AGI for contributions of cash) when you contribute to the fund, even if:

• You want to delay decisions on where your money is going in order to develop a more thoughtful and impactful giving strategy
• You choose to give to qualifying public charities in installments over time

Let’s say you hold securities that have appreciated significantly. By donating the securities to a DAF, you can eliminate the potential capital gains tax hit, while you are granted extra time to decide when and where to make charitable gifts. Between the time you make a donation to a DAF and when you finalize your giving strategy, your assets can be invested with the potential to grow tax-free.

Since the 2018 tax code changes, we are seeing a common tax planning strategy that involves “bunching” deductions — including deductions for charitable contributions — into a single tax year to maximize savings in that year. This strategy may be especially useful in a year a taxpayer has a significant one-time income event, such as a large capital gain from the sale of an asset, significant bonus compensation or a payout from a deferred compensation plan. While the new law has reduced and, in some cases, eliminated several longstanding deductions that taxpayers have relied on to achieve tax savings, it has also made the deduction for certain charitable contributions more advantageous by increasing the existing limitation on the deduction that can be taken for contributions of cash. As a result, careful planning for charitable giving has become an even more valuable way to increase tax savings.

Q. What are some ways that you can fund a DAF?

A. Many different ways, such as cash, real estate or securities. Highly appreciated securities are typically a smart gift to give to a donor-advised fund. Other ways include donating illiquid assets like collectibles, real estate or art.

Q. Are there any important rules or regulations regarding the Tulane Donor-Advised Fund?

A. Yes, there are and you should consult with your tax and estate attorney. Some of the common things that come up, especially with an organization like Tulane is, you can’t use it to buy your football tickets. You cannot do things that will benefit you personally through grants out of the donor-advised fund. You also cannot give to an individual. So, you could give to a scholarship program, but you could not pay someone’s tuition through the donor-advised fund directly. Those are some of the important rules when it comes to an educational institution like Tulane.

Q. In what circumstances would it be beneficial to have a donor-advised fund versus a private foundation?

A. I’d say in most circumstances. DAFs are much more widely used these days because they’re far less administratively challenging. You can set them up without establishing a board, defining spending policy, or taking on the oversight that comes with having your own private foundation. Another benefit is that you can give anonymously through a donor-advised fund and there are lower investment minimums for donor-advised funds. They’re just more operationally easy to manage.

Q. In what cases would it be beneficial to have a donor-advised fund versus making direct grants to a charity?

A. As I mentioned, you’ve got time to make decisions when you make the grant to the donor-advised fund, so you can make a gift in a certain calendar year, if you have a reason like a tax consideration. Donor-advised funds are a really effective tool to be a parking space for your money, while you figure out your philanthropic strategy. With the latest revision to the tax code, it makes sense for people to “bunch” their gifts to philanthropy. A lot of folks are reconsidering gifts they used to make over five years and making that gift to a donor-advised fund in a single year, and then doling it out over time from the fund as a tax-planning strategy.

Q. You have been working with the staff at the Tulane Office of Gift Planning for more than four years. Could you tell me what sets this group apart and why you’d advise clients to work with them?

A. They’re smart and they’re looking for donor-centric solutions. They’re not just promoting a donor-advised fund because it’s beneficial to them; they’re promoting it because it’s an effective tool for a donor’s philanthropic giving — a solutions-oriented focus.

To get more information, see the website or contact the Tulane Office of Gift Planning at 800-999-0181 or giftplanning@tulane.edu.

John Rogers is an institutional consultant for Graystone – Farmington Hills, a business of Morgan Stanley. John delivers objective, customized strategies for institutional investors to meet their missions. John also leverages sophisticated resources and exclusive tailored investment opportunities to help meet the complex needs of investors with significant wealth.

Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax or legal advice. Individuals should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trusts, estate planning, charitable giving, philanthropic planning or other legal matters.

The Morgan Stanley Global Impact Funding Trust, Inc. (MS GIFT) is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. MS Global Impact Funding Trust (MS GIFT) is a donor-advised fund. Morgan Stanley Smith Barney LLC provides investment management and administrative services to MS GIFT. Back office administration provided by RenPSG, an unaffiliated charitable gift administrator.

Information contained herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness. CRC3741524 9/2021