Private foundations and donor-advised funds: A new CPA best practice.

• Author: Tillery, Susan M.

An 'outstanding practice' combines personal financial planning with tax compliance to help clients maximize charitable deductions, provide solutions for a host of difficult situations in their financial lives, avoid capital gains tax, and create a family legacy.

"Best practices" is a term CPAs are quite familiar with; however, the term takes on a new meaning when the discipline of tax compliance is combined with that of personal financial planning. This combination creates a new type of best practice, which may be more aptly referred to as an "outstanding practice."

CPAs who have combined tax compliance and personal financial planning services have most likely experienced the considerable satisfaction of offering them to their clients. CPAs who have not yet combined these two disciplines will, hopefully, gain a new perspective from this column and begin to enter the win-win experience of outstanding practices.

It is important to clarify that personal financial planning is not fundamentally about managing assets or selling a product. CPA personal financial planners may do these things if they are so inclined, but they create an outstanding practice when they combine the discipline of tax compliance with the discipline of personal financial planning. Investment management and product sales are not included in the discipline of personal financial planning; they are their own disciplines.

Charitable giving and philanthropy provide an excellent example of the two disciplines coming together to create an outstanding practice of exploring how philanthropic vehicles can create the maximum charitable contribution deduction. The process begins by identifying clients with investment accounts. Then asking:

* Do these clients have donative intent?

* Do they have concentrated stock positions?

* Do they have highly appreciated stock?

* Do their investment advisers have a need to rebalance or sell securities to generate cash?

* Do they have concerns over how much money to leave to charity and how much to leave to their children and/or grandchildren?

If the answer is "yes" to any of the above questions, there is an opportunity to introduce these clients to two philanthropic vehicles: the private foundation and the donor-advised fund (DAF).

Why is this considered an outstanding practice, when these vehicles can be used without combining the two disciplines? First, consider a CPA offering tax compliance services without personal financial planning services. The CPA can share these strategies with clients; but due to the focus on tax compliance issues and deadlines, these conversations may take place after year end when it is too late to facilitate implementation of the appropriate vehicle. However, if CPAs also provide personal financial planning services, their clients are speaking and meeting with them throughout the year. This provides a clear picture of a client's overall financial situation and ample time to integrate tax compliance and implement the appropriate strategies.

Next, consider a CPA who offers personal financial planning services without tax compliance services. The CPA...