The Investment Scientist

Posts Tagged ‘charitable giving

Tax planning tips

Tax planning tips

Last week, I went to a luncheon seminar hosted by Fidelity Charitables, a division of my custodian company Fidelity Investments.

I went there because 30% of my clients are business owners. I know that one-third of them have strong charitable intent, and helping them do well by doing good is part of my responsibility.

Part of the dilemma of successful business owners who have charitable intent is this: They make a lot of money when they are running their business, and especially at the time they sell their business. But they give away their money to the causes they care about usually in retirement when they do not have as much income to write off. Without careful charitable planning, they will end up paying a lot more in taxes and have a lot less to give to charity.

Here comes the rescue plan: Donor Advised Fund (DAF).

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[Guest Post by Christopher Guest] Many people I work with to plan their estate want to make some type of charitable gift. Charitable giving through a person’s estate plan falls into three categories: a simple bequest through a will, a charitable remainder trust or a charitable lead trust1. Most people want to make an altruistic donation to some cause that holds a special place in their heart. However, for the more sophisticated estates, charitable giving can be a valuable estate tax planning tool.

The simplest and most popular form of charitable giving is a bequest through a will. Basically, there will be a clause in the will that says “I give X amount of money to charity Y.” If the estate plan is more sophisticated, the bequest could be based on a percentage of the estate’s value or a part of the residue of the estate2. Like all charitable bequests, it is tax deductible.

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.

Twitter: @mzhuang

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