My son Kain is a music producer. Man, the kids got talent. How can I use what he’s passionate about to teach him a thing or two about money?

Here’s one way…

Let’s say that I transfer $2,000 of a highly appreciated stock to a Donor Advised Fund (DAF) in 2021. This stock has a gain of $1,000. Once I transfer it to the DAF, three things happen:

• The DAF will sell the stock and neither I nor the DAF will pay tax on the $1,000 gain. As a San Diego resident, that will save me roughly $350 in capital gains tax (20% Federal long-term gains rate + 3.8% Medicare surtax + 11.3% CA).
• I will get a charitable tax deduction for $2,000 this year. That will save me roughly $900 in ordinary income tax.
• I can use the $2,000 in the DAF to donate to any qualified 501c3 charity, in any amount I wish (subject to lower limits), over any time period I choose. Example: I can give $200 to 4 different charities this year, $400 to 8 different charities next year, $1000 to 2 different charities the year after that, and so on, until I given away the entire $2,000.

Where does my son’s passion for music come in?

I’m going to tell him that I’ve set up this fund and would like for him to pick a few music related charities to donate to.

He might think that’s kinda cool and want to understand a bit more about the fund and how it works.

Ahhh, a real dialogue with my son, an opportunity to get him involved in our family’s finances, and a way for us to give back as a team. The triple win.

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.