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Enjoying the Ride: Donating your way

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What a year 2020 has been! We have experienced a global pandemic resulting in lock downs, social distancing, stay-at-home workforces, remote learning, a bear market, a recession, riots, civil unrest, fires, hurricanes, foreign wars, mask wearing, a divisive Presidential election cycle and more. Despite all of the craziness and uncertainty, entering the holiday season I find myself feeling blessed with a career, a family who loves me, good health and a roof over my head. 

I also think about those people in our communities, in our country and around the world who are less fortunate and possibly in pain and suffering. One way we can help individuals in need, or support causes that we are passionate about is to make charitable donations. For those who may be more fortunate, more charitable or both, considering a Donor-Advised Fund may make sense.

A DAF is essentially a charitable investment account for the sole purpose of supporting charitable organizations you care about. You are eligible to donate or contribute cash, stocks—including private company stock, non-publicly traded assets such as restricted stock, oil and gas royalties, hedge fund interests, private business interests or even cryptocurrency and more.

One great strategy is to donate shares of highly appreciated stock, mutual funds or other securities to a DAF. Doing so could allow you to contribute up to 20 percent more than you might otherwise be able to contribute since you would pay no gains on the appreciated asset you are contributing. All of your donations to a DAF are eligible for an immediate tax deduction. Please note, that in return for that tax deduction, any contribution to a DAF is an irrevocable commitment to charity; the funds cannot be returned to the donor or any other individual or used for any purpose other than gifting to charities. The donations can be used to support virtually any IRS-qualified public charity known as a 501(c)(3).

When you decide to give and ultimately support what you believe to be a worthy cause, most of us want our charitable donations to be as effective as possible. DAF’s are the fastest-growing charitable contribution vehicle in the U.S. because they are one of the easiest and most tax-advantageous ways to support charities. 

While you’re deciding which charities to support, your donations can grow tax-free, making even more money available for charities in the future. Most DAF’s have a variety of investment options from which you can recommend an investment strategy for your charitable dollars.

It’s important to choose the right DAF for your charitable contributions. The fact is, not all DAF’s are the same. Some things to consider include, what are the DAF’s investment options? These can vary widely, with some organizations offering few, and others providing a broad array. Does the sponsoring organization accept “unique or illiquid” assets? Not all funds will accept the assets that a donor might be well advised to contribute, such as appreciated stock or real estate. How flexible is the DAF regarding the choice of charitable recipients and how easy is it to add another charity to their list? Does the DAF have foreign grant expertise? If you want to give to an international charity, there are tax and reporting implications, among others. These are all questions and topics to consider when you’re ready to make a donation.

This tax-efficient wealth management tool is a smart way to support the causes you believe in and possibly even provide for your family members during your lifetime and beyond. Of course, if DAF’s aren’t suitable for you, you can donate your money directly or consider donating your time and expertise to charitable causes instead. I think it’s as simple as remembering the Poison song “Something to believe in” and you are on your way to the joy of gifting this holiday season. Sometimes there is no better feeling than allowing others to enjoy the ride!

Scott L. Brown is the Co-Founder and Managing Principal of Shore to Summit Wealth Management.  His wealth management career spans more than 25 years and he currently works and lives in Bozeman, MT with his wife and two sons.

Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy Wells Fargo Advisors Financial Network and Shore to Summit Wealth Management are not legal or tax advisors. You should consult with your attorney, accountant and/or estate planner before taking any action. 

Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Shore to Summit Wealth Management is a separate entity from WFAFN. Shore to Summit Wealth Management is located at 105 E. Oak Street, Unit 1A Bozeman, MT 59715 # 406-219-2900.

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