We have a DAF which we contribute in a clump fashion now, but will contribute with QCDs later. These charitable contributions, and our own assets, are in Pralana.
The DAF (a separate entity) has regular distributions to a few charities. I have recently been wondering how much I need to contribute to the DAF (either in clumps or in QCDs) to ensure that the account value lasts our lifetime (and preferably longer). The DAF is invested with its own allocation. I thought, "Can I model the DAF in Pralana, by itself, as if it were another person?"
So I opened the tool and one of the first questions is "what kind of account?" Well, a Roth makes some sense because it is non-taxable. So I started a "non-person" (the DAF), aged 60 to ensure I could have the charitable distributions start this year. I gave the Roth the initial value of the DAF account this year.
I put the total yearly distribution amounts into Expenses -> Miscellaneous. Checked them as Essential and COLA.
I put our donations to the DAF into Income -> Other Income Stream. Three streams: two five-year clumped donations and then QCDs forward.
It "kind-of-sort-of" works, but I see a several issues with this approach.
1) The donations are in Today's dollars (as requested in Other Income Stream), but in Tabular Projections -> Income, they are losing value. I was thinking those would increase to keep pace with inflation. Maybe this isn't the best way to model contributions to the DAF?
2) The non-person (the DAF) has a standard deduction. I didn't think about that. I'm not sure if it matter...
3) Since it is a (faked) Roth account, I can't technically model a contribution to that. The non-person doesn't have any earned income. It doesn't give me an error...
(2) and (3) end up "creating things" on the Tabular Projections -> Taxes page. I'm not sure if these Taxable things matter. I could ignore them if they don't change the drawdown modeling of the DAF.
Is there another way to go about this DAF modeling in Pralana?
Thank you,
Dave
@dave Hi Dave. You have correctly determined that PRC cannot really model anything other than these types of accounts: cash, taxable, tax-deferred, and Roth. So, you may have gotten as close as you'll be able to get. I don't have any better ideas myself. Maybe Bill Hines (fee-only advisor who uses Pralana) can offer some assistance here.
Stuart
I am ignorant on the subject of DAFs, but once you convert to the online version, you can enter a % increase each year for Other Income streams. Match that to inflation and it will eliminate your issue #1. The online version also doesn't limit the number of Other Income streams, so you can make your contribution plan as complicated as you like.
For items 2 and 3, not sure the standard deduction matters, but you should be able to test that by setting up another fake income stream equal to the standard deduction and then a fake expense stream equal to the same amount so that it doesn't affect the balance overall, just nets out the standard deduction.
@ricke I haven't had a client yet with a DAF, but I've looked at it and thought an approach similar to what you're saying would get it in the ballpark.
