Donate Now, Give Later

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Please note the publish date of this blog. Financial information, market conditions, and other data mentioned in this post may no longer be accurate or relevant.

Baby boomers who are in the final decade of their high-income years might want to stop using their credit cards and checkbook to give to charity. There’s a better way to be generous and reduce your taxes at the same time—the donor-advised fund (DAF).

How a Donor-Advised Fund Works

You move cash or assets to your DAF and get the same tax benefits as if you sent the assets directly to the charity (a deduction for the contribution and the avoidance of capital gains tax on the unrealized appreciation). But, with a DAF, the years in which your charities receive your donations can be different from the years in which you receive your tax deductions. Once your assets are in the DAF, you have discretion as to the timing and amounts you give to charity, as well as how the assets are managed within the DAF.

Three Slam-Dunk DAF Strategies


Final Years of Primary Career

Why not pre-fund some of your post-career charitable gifting while your tax bracket is high and you can enjoy a larger tax deduction? Say you’re age 55 and aiming to end your current career by age 60. In those last five big-income years, you make tax-deductible contributions with the lowest cost basis assets to the DAF and allow that money to continue being invested until your 60s. You could easily build up the DAF enough to cover a decade or more of post-career charitable giving.

Volatile Income

Anyone in the entertainment industry will tell you that it’s $1 million this year and who-the-heck-knows next year. Commission-oriented professionals also understand the dilemma of unpredictable income. But if charitable giving is going to be a part of your life, you might as well make your contributions to a DAF when it can reduce your taxes the most (when you’re in a high tax bracket). This means you can also be generous in those low-income years when it would otherwise feel unaffordable.

Portfolio Makeover

When you give your portfolio a makeover in order to better diversify and lower your hidden costs, you may end up paying some capital gains taxes as a result—the perfect time to explore a DAF. You simply identify assets with the largest unrealized gains and move your desired amount to the DAF. What a great way to take some winnings off the table, diversify and get a tax benefit, all in one fell swoop!

Happy giving and tax saving.

Disclosure

Abacus Wealth Partners, LLC is an SEC registered investment adviser. SEC registration does not constitute an endorsement of Abacus Wealth Partners, LLC by the SEC nor does it indicate that Abacus Wealth Partners, LLC has attained a particular level of skill or ability. This material prepared by Abacus Wealth Partners, LLC is for informational purposes only and is accurate as of the date it was prepared. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Advisory services are only offered to clients or prospective clients where Abacus Wealth Partners, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Abacus Wealth Partners, LLC unless a client service agreement is in place. This material is not intended to serve as personalized tax, legal, and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Abacus Wealth Partners, LLC is not an accounting or legal firm. Please consult with your tax and/or legal professional regarding your specific tax and/or legal situation when determining if any of the mentioned strategies are right for you.

Please Note: Abacus does not make any representations or warranties as to the accuracy, timeliness, suitability, and completeness, or relevance of any information prepared by an unaffiliated third party, whether linked to Abacus’ website or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

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