One of my favorite parts of being a financial planner is getting to see some of the cool things our families are doing with their investments.
While the future is not guaranteed, the markets have exceeded our planning expectations for quite a while (approximately for the last 15 years).
For many, this has created an incredible amount of abundance (money that is more than what is needed to fund their financial plan).
Whether this abundance is the result of selling property and being left holding way more cash than needed; or being the lucky recipient of a wonderful 7-figure inheritance from a distant relative; or simply the result of successful investing.
These situations also create massive taxation situations.
Given this, we’ve had the opportunity recently, to help these three families take advantage of their philanthropic and charitable desires through Donor Advised Funds:
What’s a Donor Advised Fund (DAF)?
- It’s like a charitable savings account. You put money in, receive an immediate tax deduction, and then later decide how you’d like to distribute it.
- The money can potentially grow tax-free while it sits in the account it is invested. This allows for the potential to give more than initially invested.
- You are in control. Once the funds are in the DAF, you direct where it goes (any IRS approved 501c3 charity) on your timeline.
Important to keep in mind: These are irrevocable gifts. You can’t change your mind and get the funds back.
It’s been awesome to see our families reduce their tax liability while substantially donate to charitable organizations that are doing meaningful work.
If this situation is familiar to you and you’re curious to see if a Donor Advised Fund is an option within your plan (or just explore a deeper conversation about your philanthropic goals), we’d love to talk about it.
–Nic
Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes.
