As a new grandparent, I’ve given a lot of thought to the kind of family legacy I want to start building. The truth is, I often have similar conversations with my clients who are grandparents, as well. It’s incredibly important to teach our kids and grandkids the ins and outs of giving, and helping to show them how to give according to your family values can be even more meaningful.
One way to teach your grandkids to give, and encourage them to think about the type of impact they want to make on the world, is to leverage a Donor-Advised Fund.
A Donor-Advised Fund (DAF) is a savings vehicle that’s specifically set up to accept charitable donations. When you make donations to the account, the fund holds and invests them for you so that the balance continues to grow.
Then, when you’re ready, you can recommend grants to qualified charities. The beauty of the DAF is that you can contribute cash, appreciated stock, or other assets to the fund - and the money grows tax-free. You also get the maximum allowable tax deduction the year you donate, not the year you recommend a grant, which makes it an excellent tax planning vehicle for those itemizing deductions.
One of the most popular ways to fund a DAF is with appreciated stock. Whether you have employee stock options or have a large amount of appreciated stock from another investment or gift, you can donate those assets directly to your DAF. The benefit of this is that the appreciated assets you donate aren’t subject to regular income taxes or capital gains taxes, and you’re able to take the fully appreciated amount of the assets as your tax deduction.
When you’re ready to request a grant from your DAF, you either:
There will be a set of preapproved, qualified charities and organizations that you can request a grant to go to. All of the organizations your DAF approves will be vetted carefully. They’re 501(c)(3) organizations that are recognized and public. Keep in mind that DAFs typically can’t donate to private organizations or charities.
Getting Your Grandkids Involved
This is the exciting part of the process! Once you’ve contributed to your DAF, and are ready to request a grant, get your grandkids involved. Start the conversation by explaining what a DAF is, and how you’ve been funding it so that they can help you decide where those donations go. This can spark age-appropriate conversation around what your grandkids value, and the types of causes they’re passionate about supporting. Their answers may surprise you!
If they look for input from you, you can walk them through the types of causes and organizations you’ve supported historically and why. If there are particular causes your family is particularly passionate about or connected to, explain why and invite them into the tradition.
Raising charitably-minded kids and grandkids is incredibly meaningful. Getting your grandkids involved in charitable donation is a great way to teach them the importance of being grateful for what they have and giving to others. Being able to have conversations about leaving a legacy and making an impact now will help to guide their financial decisions for years to come.
Looking for other ways to pass on the spirit of giving to your grandkids? Contact us today! Let’s talk about the type of legacy you want to leave for your family.
Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.
"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.