Broker Check

Helping Others The Tax-Smart Way

December 15, 2020

It was famed educator Booker T. Washington who said, “Those who are happiest are those who do the most for others.” How true that is.

I like to keep active in several charities and organizations, but perhaps the one closest to my heart is The Girl Scout Council of Greater NY. It’s the only Girl Scout Council serving a 100% urban population, with over 70% of its members representing underserved neighborhoods or black girls.

And it truly makes me happy. Like so many things that come into our lives, I had no intention of supporting the organization initially. I have my daughter to thank. Shortly after she became a Girl Scout, she was convinced I had to become involved. Like most children, she waged a persistent campaign until I relented. It was one of the best decisions I’ve made.

The roles of financial coach and life coach are sometimes intertwined, and so I share the pleasure I receive from supporting the Girl Scouts with my clients and help them pursue their own passion to give to others in a way that also makes smart financial sense.

One way to accomplish that is with a donor-advised-fund (DAF). This little-known fund is a powerful tool when it comes to tax-smart charitable giving. Essentially, you can deposit an unlimited amount of money, stocks, real estate and other assets to the fund at any time, and then spread out the distribution of the fund to the charities of your choice over multiple years.

For example, let’s say you benefit from a particularly lucrative year and you’re anticipating a large tax burden. You usually donate $10k a year to your favorite charities. In this scenario, you would opt to deposit $100k into your DAF in a single year and then proceed to make $10k donations each year for the next 10 years. You benefited by offsetting your tax burden for the bonus year while continuing to make annual charitable donations as you had planned. Your DAF can also benefit from market growth, which allows you to give even more than the $100k you initially deposited into the fund.

It’s just one more way we can apply tax-smart strategies to help you get the most from the money you’ve earned. If you’d like to walk through how a DAF might improve your financial picture or any of our other tax-smart investment strategies, let’s talk!

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