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The following presentation by New England Capital Financial Advisors, LLC (“NECFA”) is intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from NECFA or any other investment professional of your choosing. Please see additional important disclosure at the end of this penetration. A copy of NECFA’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.newenglandcapital.com.
The Charitable Giving Strategy You Might Be Missing
Hi, Matt Carreras here with New England Capital. If charitable giving plays an important part of your life and your financial plan in the future, then today I’m going to talk about a tool that you might want to consider. It’s a powerful investment tool called a Donor-Advised Fund, or DAF. Think of a DAF as a charitable investment account specifically set up to support the charitable organizations that you care about.
Here's how it works:
- You set up a DAF much like you would set up a regular investment account… and it can be done through institutions such as Fidelity, Charles Schwab and others.
- You then contribute cash, stocks, or other assets into the DAF, and you receive an immediate tax deduction. From there, your donation is invested and can grow tax-free over time inside the DAF.
- Then, at your own pace, you recommend grants from the DAF to the charities you support.
So, let’s look at some of the main benefits of doing this through a DAF instead of writing checks to the charities yourself.
First, there’s flexibility. With a DAF, the timing and amount of your donation to the DAF doesn’t have to be the same as when the DAF makes grants to the charities. The benefit here is that is you can fund your next 5 or 10 years’ worth of donations in a year, for example, which may allow you to take a much bigger deduction… and you can plan this strategically to happen in a higher income year. And you don’t have to decide which charities to give to immediately. At your recommendation, the DAF will pay out grants to charities you select, in the amounts you want… at the time you want.
The second main benefit is tax-efficiency. By grouping future donations together into a single year tax deduction, you can take advantage of the deduction by itemizing. Otherwise, in many cases, you’d get no tax benefit for smaller donations spread out over years because you’d most likely be taking the standard deduction and not itemizing.
Here’s another great tax benefit. The assets in the DAF can continue to grow completely tax free. So no taxes on interest, dividends or capital gains – all of the growth in the assets over time goes to the charities increasing the impact of your donation.
One last example to mention involves an appreciated asset, such as stock. If you've owned highly appreciated stock for more than a year and donated it to your DAF, you get to deduct its full market value of when you donate it while also completely avoiding capital gains taxes. Just another example of increasing the power of your donation.
And the last main benefit to mention is simplicity. Instead of tracking a handful different receipts around tax time every year, you'll receive just one annual statement from the DAF showing your donations and grants made each year. As your advisor, we will also help you manage the fund itself and automate your grant recommendations, simplifying the process even more.
So as you think about your charitable goals and how to make the most impact on the causes you support, consider how a DAF could fit into your plan. If you'd like to explore this more, please let us know. Thanks for watching, and we’ll see you soon.
Important Disclosure Information
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by New England Capital Financial Advisors, LLC [“NECFA”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from NECFA. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. NECFA is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the NECFA’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.newenglandcapital.com. Please Note: NECFA does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to NECFA’s web site 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. Please Remember: If you are a NECFA client, please contact NECFA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.