The Importance of a Donor Advised Fund for your Estate Planning Goals

The end of the year is quickly approaching, and what has turned out to be a year riddled with pain, suffering, sacrifice, and division, has also been filled with acts of extreme kindness, generosity, altruism, and love. In a typical year, many consider their charitable intentions during the months of November and December to coincide with the holiday season and/or to effectively tax plan before year end. Given the need for, and the desire to help this year by so many, in opening a Donor Advised Fund account you can give back, manage your tax bill, and grow your family’s dynasty all in one swoop.

Consider opening a Donor Advised Fund (DAF)

A DAF is a charitable giving vehicle that allows donors to contribute as frequently as they like and then recommend grants to their favorite charities from their personal fund. The fund is established through a public charity so donors can receive an immediate tax benefit on their contributions and avoid the capital gains tax on appreciated assets.

Fund the account with cash and/or appreciated stock

You can fund the account with as much or as little as you want, but you can also gift stock to your DAF. During 2020, large cap technology stocks have had an enormous run, so the taxable portion of your portfolio could have highly concentrated position in certain stocks with large imbedded, unrealized capital gains. Consider gifting those stocks (or a portion of those positions) to your DAF. This reduces the risk of your portfolio and removes a future tax liability for yourself and descendants.

Tax laws could be changing

The possibility of the removal of the step-up in cost basis at death is real. By gifting stock, you remove the tax liability to future generations. If the step-up in cost basis comes to an end, all of those positions in your taxable account with large imbedded unrealized capital gains will get transferred to your next of kin and your current tax burden will be passed on.

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Written by

Michael Meltzer

Portfolio Manager

Michael T. Meltzer is a Portfolio Manager at Tocqueville Asset Management L.P. He joined Tocqueville in 2008 and is primarily responsible for asset allocation, risk management, portfolio analysis and trading, tax management, and client service.

Prior to joining Tocqueville, Mr. Meltzer worked at Bear Stearns Asset Management (BSAM), where he was an Associate Director and Assistant Portfolio Manager in the Specialized Investment Management Group. He started at BSAM in 2003 as an analyst, focusing on institutional marketing and client service for the not-for-profit and family office sectors.

Actively involved in the non-profit community, Mr. Meltzer serves on the Board of Maya’s Hope, an organization dedicated to improving the lives of orphaned and special-needs children globally, having previously served as Chairman of the Board. He was recognized with the 2016 Global Community Impact Award from the Invest in Others Charitable Foundation and was named one of Crain’s New York Business’s Notable LGBTQ Leaders and Executives in 2021. He also serves on the Jewish Communal Fund’s Professional Advisor Council.

Mr. Meltzer earned a B.S. in Finance and International Business from New York University and a J.D. from Fordham University. He holds his Series 7 and 66 securities licenses.

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