Tax planning is an integral part of what a Wealth Advisor does every day.  Recently I saw an article in ThinkAdvisor that covered the downside of something most investors like: a bull market. Anyone looking to sell appreciated stock is unfortunately going to trigger a tax on capital gains.

The article referenced the math: a long term capital gains tax at potentially up to 20% and a possible additional 3.8% surtax on net investment income for certain investors can lead to an unwelcome tax bite, removing the " appreciation" that an average investor should normally have for an appreciated asset.

The solution to lessen that tax bite: a donor advised fund.

Provided the shares have been held longer than a year, shares can be directly deposited into a donor advised fund, with the donor enjoying a tax deduction based on the full market value of the stock.

This transaction allows the donor to save what they would have paid in taxes and instead use the value of the shares for charitable giving through their donor advised fund.


Donor advised funds are good for many reasons and saving on taxes is a big one.  But also consider the cost of educating your children on the value of money.  One of the most effective ways children grow and learn about the value of money is when they are tasked with the job of having to give it away.  By setting up a fund that has your family name on it and systematically transferring a few highly appreciated shares over time, you will find that as it grows in value you can task your children with the job of finding deserving charities that could use a donation. They start to feel like they can make a difference in the world with every donation and as important, they start to think about what they are doing with the money in their own pocket.