Donor-advised funds offer powerful tax advantages within a comprehensive retirement plan for charitably inclined families.

Most families realize that the Gates, Buffetts, Carnegies, Rockefellers and Fords have successfully used charitable gifting and foundations as a tax reduction strategy, but families fail to best utilize charitable gifting in their own planning. Families, and advisers, have incorrectly assumed great wealth is needed to compensate for additional accounting and foundation expenses and achieve any significant benefit of coordinating charitable gifting and retirement planning.

On the contrary, Middle America can recognize many of the fantastic benefits of incorporating charitable planning with their financial planning by utilizing a simple and tax smart charitable giving vehicle called a donor-advised fund. Created over 30 years ago by community foundations and now available nationally, donor-advised funds are a popular form of family philanthropy in America today, outnumbering private foundations by a margin of 2 to 1. Simple to open and inexpensive to operate, they are a wonderful financial vehicle which astute retirees use to both improve their retirement-planning situation and satisfy their accustomed charitable gifting. Consider these powerful advantages:

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Qualified charitable distributions (QCD’s) are back. Solid planning for retirees may allow them the ability to go back and reduce their 2012 taxes using this strategy, but they need to be done PDQ (Pretty Darn Quick)!

Congress passed the American Taxpayer Relief Act of 2012 (ATRA) early this year which preserves many of the Bush era tax provisions, patching the AMT, and avoiding, or delaying, the “fiscal cliff”. The Bill also renewed popular QCD tax-break provisions, but only in 2012 and 2013. Leave it to Congress to pass a law in 2013 affecting 2012 tax returns. While this tax break applies only to IRA owners taking Required minimum distributions (RMD), those retirees who can use it can get a nice tax break.

RMDs often create extra taxation on those over the age 70 1/2 who must take unwanted taxable income from IRAs. The QCD allows an IRA owner to satisfy all or part of these RMDs tax-free if they transfer funds directly to a qualified charity. Individuals may even contribute more than their RMD’s to charity, should they choose.

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The New Year is here! With the promise of a fresh start, families will make the pledge that 2013 will be the year that they finally vow to accomplish the one thing that will make their lives better or more fulfilling.

Resolutions are often abandoned because they require a permanent commitment or lifestyle change. For most, a New Year’s resolution has a life expectancy shorter than my aunt’s homemade fudge at Christmas.

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As year-end approaches, you are probably tired of hearing about the looming fiscal cliff. It amazes me that we are mere days away from an event that can possibly trigger a double-dip recession and Congress appears totally incapable of finding a solution.

As annoying as this situation is, failure to prepare for this likely event is potentially as dangerous as the event itself. When you are in or nearing retirement, your focus needs to transition from potential profits to how much risk you should and can take. It’s not as important how we got to this cliff, but should we go over, how far will our retirement plans fall. During times like this, it’s important to evaluate your portfolio risks.

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Even if this event proves to be far less chaotic than what many experts expect, the fact remains clear that for years retirees have been reminded that you should reduce risk while transitioning to retirement. Yet, far too many families are taking unnecessary risks with their retirement assets than they should. Often the retiree and their advisers ignore the exposures they are facing or focus on the wrong kind of risks in retirement. They focus on their risk required or their risk tolerance , instead of their risk capacity .