(While Also Doing Good for Your Finances)

Here at Hudock Capital, there are many types of goals we help our clients achieve, some of which they’ve been looking forward to their entire lives. One of the best parts of my day is when clients send us pictures of that magical trip we helped them take, the ribbon cutting of the business we helped them open, or the new grandbaby we’ll help them send to college one day.

All these achievements make our clients happy. But there’s one goal in particular that stands out. One goal that, when our clients achieve it, makes life feel especially meaningful.

That is the goal of charitable giving.

The older we get, the more we realize how much we have to be thankful for — and the more we want to pass on our blessings to others. There is no accomplishment more satisfying than knowing you made a difference in somebody’s life. But while the spirit of giving comes from the heart, that doesn’t mean the head can’t have its say. There are many ways to give charitably, but there is one in particular that we feel works best from a financial planning standpoint: A donor advised fund (DAF).

Also known as a charitable gift fund, a DAF is a type of investment account designed specifically to help people support charitable organizations they care about. The reason I love it so much is because it’s the easiest way to:

• Make a meaningful contribution to a cause, community, or charity.
• Improve your own financial situation by qualifying for a tax deduction.
• Give yourself flexibility when deciding who or what to support.

Let’s go through each of these benefits one by one.

Meaningful Giving

Many people think of charitable giving as merely writing a check, but there are lots of ways to help the causes you care about. Through a donor advised fund, you can contribute not only cash, but any public stocks, bonds, or other securities you own. Alternative assets like cryptocurrency or private stock also qualify. That makes DAFs preferable to, say, giving directly to a private foundation, because non-cash assets can appreciate in value over time.

Another nice feature is that multiple people can contribute to a DAF. This is handy when friends and family want to pool their resources to help a specific charity, but don’t have the assets to make a particularly large donation on their own.

Tax Advantages

All contributions you make to a DAF are tax deductible. Generally, you can deduct up to 60% of your adjusted gross income when contributing cash to a DAF, versus only 30% to a private foundation. Contributing certain types of assets, like private stock, can also sometimes help you avoid capital gains taxes.

Finally, the funds in your DAF can grow tax free for as long as you want. There’s no time limit on when you have to donate the funds to a charity.

Flexibility

The absence of a time limit is important, because it gives you the flexibility to decide exactly which charities you want to support. Here at Hudock Capital, many of our clients usually know which cause they want to donate to, like animal welfare, the environment, or cancer research. But they aren’t always sure which organization is best. With a DAF, that’s no problem. You can continue contributing to it for months, even years, allowing the funds to grow while you do your research. That way, you can make a truly informed decision and know your money is going where it can do the most good.

Cement Your Legacy

One of my favorite things about donor advised funds is that you can actually give the fund a name! Some people choose to name their DAF after themselves in order to ensure their legacy lives on. Others choose to commemorate a specific person in their lives. For example, I set up my personal fund in the name of my mother and stepfather. Both were wonderful individuals who loved giving back however they could. I want them to always be remembered, even after I myself am gone. Thanks to my DAF, they always will be.

My son and business partner, Michael, likes to say that every person dies twice: Once when their body passes away, and again when their memory passes away. Charitable funds ensure that you, or the people you love, will never fade from memory.

How It Works

We set up donor advised funds for clients every year, so we’ve gotten quite good at making the process quick and easy! We can help you set up the fund and ensure the money inside is invested in a way that makes the most sense for you and your philanthropic goals. Then, when you’re ready to designate a specific charity, we will direct the money to wherever you want it to go.

Our team can also handle any additional contributions you want to make. In my family, we like to take time at the end of each year to review our assets and see which have appreciated in value. Then, we’ll contribute a portion of those assets into our personal DAF. Many of our clients like this approach, too, but you can choose to contribute as much as you want, whenever you want.

Now, as with every type of investment account, it’s important to remember that DAFs do come with fees and fees should always factor into your thinking. We will discuss fees in detail with you. In addition, any contributions you make to a donor advised fund are irrevocable. That means you can’t withdraw the money if you change your mind.

Despite those stipulations, a donor advised fund remains one of the most effective ways to make a difference in our community. Here at Hudock Capital, our mission is that whenever someone walks through our door, they are magically transported to a world that’s kinder, gentler, warmer, and where their dreams come true. Most of our clients want to see others’ dreams come true, too…and a donor advised fund is one of the best ways to make that happen.

Another strategy that can be used for those philanthropically inclined is if you are age 70½ or older, you can make qualified donations of up to $105,000 per year directly from an IRA account without it counting as taxable income.

So, if you ever need help with achieving your own philanthropic goals, please feel free to reach out. We are happy to help in any way we can…and our doors are always open.

— Barbara Hudock