I have another "how to" post about how I might model a Donor Advised Account (DAF) with Pralana as-is. It would be fantastic to be able to do this with Pralana directly, in one data file with our other accounts.
Those who are charity-minded may already have established such an account. Once formed and once funded, the DAF funds no longer belongs to the individual(s) ("benefactors"), but they are directed by the benefactors. The DAF account grows tax-free, and distributions to charities from the account are tax free. The DAF in effect, is a charity in and of itself. The benefactors desire to know the long-term financial viability of the DAF.
To be able to model this type of account, Pralana would, at the first level:
- allow the benefactors' existing charitable deductions to be directed to go, in some part or in whole, into a new-for-Pralana account of type "DAF."
- allow the DAF contributions and growth without age or income limits of the benefactors, and be able to model the tax-free growth of that account using the same methods as Pralana currently offers (fixed RoR, MC, Historical), with asset allocation specifications as for any other Pralana investment account.
- add a new-for-Pralana "method" for the benefactors to specify tax-free distributions from the DAF, indicating beneficiary, date, and amounts. These could be lump sums and/or fixed amounts over a range of dates, but should also allow COLA increases (or not).
- add a new-for-Pralana "account" for the destination of those tax-free distributions from the DAF, indicating the beneficiary, date, and amount of each transaction in the Tabulations, only for the purposes of records. This would effectively be a "combined beneficiary" account which is not associated with the original benefactors, does not contribute to their net worth, etc., since money going into the DAF no longer belongs to the benefactor.
- be able to track the value of the DAF account over time, indicating to the DAF benefactors aspects of the long-term financial viability of the DAF, similarly to how Pralana currently shows the long-term viability of assets of individual(s).
I would be more than happy to be a beta tester for such a feature, using our own DAF as a real-life example.
Thank you!
Dave
These were called Charitable Trusts in PRC Excel/2024, so they're already there if you're using that version. They were placed someplace other than Charity though, I think in Initial Balances or something. I see them as an item that's still on the roadmap for PRC Platinum/Online but not yet implemented. I agree they're important, and a fantastic way to have fun giving, get the nice tax break by bunching charitable giving, and just help others in need.
Thanks Bill @hines202. I think the current capability isn't what I'm looking for. From what I understand from the User manual:
- PRC doesn't maintain the value of the trust (the DAF). It would be much better if the DAF itself could be like one of the accounts set up in Financial Assets. Then, the value of the DAF each year could be entered into PRC, just like any other account, and it could be monitored and modeled.
- The contributions to the trust currently must be from the regular investment account. There isn't any "link" to the table of donations listed in Expenses -> Charity. Currently those charitable donations don't go "anywhere." But if the Charity page had a column to allow the amount to go into the trust, it would provide a way to directly fund the trust from any account. For example, QCDs from IRAs could go to the DAF.
The value of the trust is very important. I know this from experience. We established a DAF and began regular distributions to a local mission. Those amounted to about 4% of the trust value, so I felt mostly confident that the DAF would not deplete. But then we added regular distributions to our church. Now I know for a fact that at its current size, the DAF will deplete much faster than we desire. So I have started to plan for large "boosts" to the DAF, then direct QCDs there. I would like a way to model this. [I was originally thinking that I would use Pralana to model this separately (different export file) from our accounts for now, treating the DAF as a sort of non-person...But PRC deals with people and standard deductions and other things that a non-person-DAF would not have. I have a "How to" request in the forum for that, in case anyone has ideas.]
I have an illustration for this and what would need to be added to PRC to support it. I don't know if Ctrl-V pasted images work...let's try it and see. I will also attach a PNG.
[edit: Ctrl-V pasted image didn't work; attached file works fine]
Thanks!
Dave
@dave Also interested in DAFs. Wondering, any "work arounds" you've discovered within the current version of wPRC that might approximate?
(Thought of 529 Account, with Children as Charity etc, but likely too many variables for confidence in overall proper DAF equivalent processing...)
Thanks,
Bob
@bo3b That's about all I've done with it. But I did learn since then that QCDs have to go directly to a charity. They cannot go into a DAF. So the DAF has the advantage of "donate now, designate later," but after age 70 1/2, why not use QCDs directly to the charity, tax-free, and cancel some RMDs while you're at it? https://www.glassmanwealth.com/wisdom/insights/qualified-charitable-distributions-vs-daf/
Since I learned that, the DAF doesn't need to last anywhere near as long as I was thinking, so no real need to model it.
