News for Professional Advisors

A client in his early 60s was approaching retirement with a high-income year and an investment portfolio that had significantly appreciated. One suggestion was rebalancing, but capital gains taxes were a concern. The client also had charitable intent, but he wasn’t sure how to give in a tax-smart way.

Strategy

Giving to a Donor Advised Fund through the Community Foundation allowed the client to donate appreciated stock. By doing this, the client:

• Avoided capital gains tax on the appreciation.
• Received a charitable deduction for the fair market value of the shares.
• Funded several years of charitable giving before retirement, when their income would drop.

Benefits

This was an idea strategy because the client was able to reduce his taxable income during a peak earning year. His portfolio also was rebalanced without triggering a tax event. And a Donor Advised Fund provided flexibility – the donor would be able to support his favorite nonprofits even after retirement and a reduction in income. 

Why it worked: 

Working with a Community Foundation can make giving simple and efficient. In this case, the Foundation handled the stock transfer, liquidation and setup of the fund. This approach also: 

• Aligned the client’s philanthropic goals with smart financial planning.
• Turned a potentially high-tax scenario into a meaningful gift with a long-term community impact. 

Advisor Takeaway

This is strong option for any client who is nearing retirement with charitable intent and appreciated assets. If clients are rebalancing portfolios or facing unusually high income in the final working years, a charitable gift of stock to a donor advised fund can be a powerful tool.

The Community Foundation can help evaluate and facilitate these gifts in a way that supports both financial and philanthropic goals.