Maximizing Charitable Giving Through Donor Advised Fund
The Challenge
Charitable giving is an important piece of the overall wealth management strategy for many of our clients. Before partnering with Morgan Rosel, a high income earning client had been donating cash and/or selling stock every year to support numerous charities. This client had owned the investments she was donating to charity for a substantial amount of time and therefore generated capital gains tax with the sale of this stock each time she donated. This added to her overall tax liability and reduced the total amount that could be gifted.
Our Solution
Our solution advised the client to discontinue giving cash to their charities and establish a donor advised fund for future charitable donations. A donor advised fund is like a charitable investment account, set up solely to support charitable organizations. The client donates an appreciated investment to their donor advised fund. The donor advised fund then sells the investment, reinvests the proceeds into a diversified pool of investments, and awaits instructions to distribute to the charity of her choice. By routing their donation through a donor advised fund they are able to avoid paying tax on the gain of the donated investment, yet receive a charitable deduction on the date of transfer of securities to the donor advised fund. We helped her select the most advantageous investments to go into the account and facilitated the transfers.
The Result
By selecting assets with a low cost basis to donate to her donor advised fund, the client realized an immediate tax deduction and reduced tax liability. The investments are continuing to grow tax-free allowing our client to donate significantly more each year to the organizations she supports. Our strategy has reduced the overall tax liability for our client while simultaneously increasing her gifting power, creating a win-win situation for both our client and her favorite charities.
Nothing in the above case study should be construed to be specific investment or tax advice.
This commentary reflects the personal opinions, viewpoints and analyses of the MorganRosel Wealth Management, LLC (“MRWM”) employees and guests providing such comments, and should not be regarded as a description of advisory services provided by MRWM or performance returns of any MRWM Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. MRWM manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. MRWM may recommend the services of a third-party attorney, accountant, tax professional, insurance agent, or other specialist to clients. MRWM is not compensated for these referrals.