As they move closer to retirement, many people start thinking forward to their next chapter and beyond. If you’re hoping to cement your legacy while reaping tax benefits at the same time, it may be worthwhile to start building a multigenerational giving plan.
There are many ways to give back, but for long-time philanthropists and Laurel Wealth Planning clients Sue and Penny Wheeler, donor-advised funds (DAFs) have turned out to be the best way. Here’s a closer look at how DAFs work and how to tell whether this giving strategy is right for you.
Discovering Donor-Advised Funds
DAFs are charitable giving vehicles that also offer tax advantages. They effectively work like investment accounts for the sole purpose of donating to charitable organizations you care about. Here’s a quick overview:
- You open an account with a DAF-sponsoring organization.
- You contribute cash, real estate, stocks, or other assets to fund the account.
- Because donations are irrevocable, you receive an immediate tax deduction.
- The assets in the account grow tax-free.
- Over time, you advise the sponsoring organization to disburse grants to various charities.
Sisters Sue and Penny Wheeler first discovered donor-advised funds (and their suitability for multigenerational giving plans) through Laurel Wealth Planning.
“I wasn’t even aware DAFs existed,” says Penny. “Laura Kuntz, the firm’s founder and Senior Wealth Manager knew giving was important to us and said, ‘Hey, you can give more this way.’”
The Wheelers were early DAF adopters, opening their funds in the early 2000s.
Since then, DAFs have exploded in popularity. They are one of the simplest ways for philanthropists to support organizations they care about, and they also set the stage for multigenerational giving plans.
Why DAFs Are Well-Suited to Multigenerational Giving Plans
From a logistical standpoint, DAFs simplify the process of creating a multigenerational giving plan. If you create a DAF, you can name your children as successor grant advisors. This means your children (or any other successors you choose) inherit the right to make recommendations for charitable distributions. You won’t need to move money from the account to give the next generation control.
Many retirement plans, investment accounts, and life insurance policies also allow you to name your DAF as a beneficiary. This is significantly easier than naming multiple charities as beneficiaries in your will, and it also allows the next generation to continue your legacy of philanthropy. Your children can start by donating the funds you’ve left, and eventually they’ll be able to add their own contributions.
The tax efficiency of DAFs makes these accounts ideal for building a long-term, multigenerational giving plan. Contributions are tax-deductible, and because you aren’t taxed on capital gains, there’s no rush to distribute the funds in the account. You and your family can lower your tax bill while also making your charitable dollars go further. Laura Kuntz adds, “DAFs are so tax beneficial and convenient that many of our clients use them. My husband and I have one as well.”
Finally, building a multigenerational giving plan around a DAF also facilitates important family conversations about charitable values and the importance of giving back. When charitable giving becomes a core part of your family’s identity, your children (and their children) are far more likely to carry on the giving that you have started.
Ready to Build Your Legacy?
Laurel Wealth Planning makes it a priority to integrate your multigenerational giving plan with your overall financial well-being. When your finances are aligned with your goals and values, it sets the stage for a serene future.
Whether you already have a multigenerational giving plan in place or you’re just beginning to explore the beauty of charitable giving, don’t hesitate to get in touch.
To schedule a complimentary meeting, email laurel.wealthplanning@laurelwealthplanning.com or call (952) 854-6250. Find out whether the Laurel Wealth Planning team is the right financial advisor for you based on your wants and needs.
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