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In this example, a client owns a stock with a 10-fold gain. She paid $10K for the stock. Today, it’s worth $100K, for a gain of $90K.

If she were to donate $100K cash to charity, she’d have to earn ~$200K, then pay ~50% combined Federal & CA tax (she lives in San Diego). Instead of donating cash to charity, using money that’s already been taxed, she can transfer the $100K stock to a Donor Advised Fund (DAF).


When she does this, three things happen:

1) She gets an upfront tax deduction (subject to certain limits) for the amount transferred to the Donor Advised Fund ($100K). Assuming a ~50% combined Fed/CA tax bracket, that shaves ~$50K off her tax bill.

2) The DAF will immediately sell the stock and neither the DAF nor our client will pay tax on the $90K gain. This results in an additional tax savings of ~37% on the $90K gain = ~$33K.

3) Even though she gets a $100K tax deduction in the year she transfers the stock to the DAF, she doesn’t have to give away the entire $100K to charity that year. She can spread the donations out to her favorite charities (in $ any amount) over any time period she chooses (subject to minor limitations).

And one of the best parts? It costs almost nothing to set up and…no attorney required.

Disclaimer: For information purposes only and should not be interpreted as legal, tax or financial advice. Always consult your CPA/tax advisor/attorney (or reach out to us;) to discuss your specific situation. Past performance is no guarantee of future results.


Look beyond financial planning. Ask about a life plan.

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