Strategic Charitable Giving
Philanthropy for the HNW family is an exercise in aligning values with tax efficiency. Donating cash is rarely the optimal strategy; donating highly appreciated securities provides a double tax benefit.
Donor-Advised Funds (DAFs) vs. Private Foundations
A DAF allows for an immediate tax deduction while granting the donor time to decide which charities will receive the funds. Private Foundations offer more control and prestige but come with significant administrative overhead and a mandatory 5% annual payout requirement.
Common Mistakes
- Selling Before Donating: Selling an appreciated asset and donating the cash incurs capital gains tax. Donating the asset directly avoids the tax and yields a deduction for the full market value.