DeVol Insurance & Financial Services
Summer 2019 

Being Charitable  

Some of my clients are realizing that, in fact, after the work we've done together, they do have enough money to live on for the rest of their lives. They are beginning to think about their legacy, but do not want to leave everything to their children, or they don't have children. So, we've been exploring the world of charitable giving together, and I thought I'd go over one of the basic concepts for you.

Highly Appreciated Assets

This is where it all begins. When you own an asset that has grown in value, and sell it, you owe tax on the gain. For example, if you buy a stock at $10/share and sell it at $20/share the $10 difference is called a capital gain. It appears in your brokerage statement as "unrealized" until you sell it. Then the gain is "realized," and you owe tax on the difference between what you paid for it (a.k.a. the basis or cost basis), and the selling price.

$ / Share
# Shares
Tax Rate %
Total $
Cost / Basis 10 1,000
Sale 20 1,000



One can acquire these assets by purchase, gift or inheritance. If by gift, the original purchase price applies. If by inheritance then the basis is "stepped-up" to the asset's value as of the day the donor died.

You can avoid this capital gains tax by making a gift of your highly appreciated asset to a charity. This is useful. Here are some relevant points.

Tax Advantage

If you are making a gift to a charity anyway, it is better from a tax perspective to gift with highly appreciated assets rather than cash. For example, if you give a charity $10,000 in highly appreciated assets you can avoid the tax on the gain and give the full $10,000. Otherwise you are giving with "after-tax" money, and at a 15% tax rate a $10K gift would cost you $11,765. 
The charity can pay you an income for the rest of your life. This is an ancient concept, going back to the churches in the middle ages. In order to be certain that the income will not outlast the donor, the non-profit providing the income must be an entity that we know will be around a long time. Hence the churches, or today, the colleges.

Cost to You $
Tax @ 15%
Gift $
Highly Appreciated Gift
Gift from Ordinary Income


The charity can pay you an income for the rest of your life. This is an ancient concept, going back to the churches in the middle ages. In order to be certain that the donor will not outlive the entity providing the income, it must be an entity that we know will be around a long time. Hence the churches, or today, the colleges. 

Particularly attractive is a Charitable Remainder Unitrust, where you participate in the investment experience of the trust, and your income has the potential to increase. If a large endowment is handling the money, the results can be impressive because they have much more latitude than the average investor. Click here for more detail.

Donor-Advised Funds

DAFs are all the rage and it is easy to see why. Here you can make your gift of highly appreciated assets, take the charitable deduction in the year of the gift, then direct a payment to the charity or charities at your leisure. In this way you separate the funding decision from the gifting decision

This is particularly useful today with the new Standard versus Itemized Deduction dilemma we all face. The standard deduction is $24,400 for married filing jointly and $12,200 single in 2019. If your itemized deductions are less than that you can take the standard instead, and your charitable contributions are wasted from a tax perspective. With the donor-advised fund, you can bunch your charitable contributions in one year so that all your deductions exceed the Standard Deduction. Then you can make the actual contribution from your DAF whenever you see fit. Click here for a Fidelity Charitable article on bunching.

As a rough example, if a couple earning $100K usually gives around $5K to charity annually and their itemized deductions for 2019 total $23,000, they're better off taking the Standard Deduction of $24,400 this year. If that couple utilizes the bunching strategy, then every third year their itemized deductions may bump to $33,000. 

You can try replacing the figures in this chart with your own data to see what you might save.

$100K Income Without Bunching
With Bunching
-24,400 Standard -33,000 Itemized
Taxable Income  75,600  67,000
Tax @15%  11,340  10,050
Tax Savings

There are many firms offering donor-advised funds, but Fidelity is one of the largest. Click to reach

Neither Sigma Planning, Inc. nor DeVol Financial provides tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Thomas Phelps DeVol is the founder of DeVol Insurance & Financial Services. He enjoys helping people transform their hopes about the future into attainable retirement plans. His persistence, know-how and diligence are the keys to his success -- and that of his clients.

Tom has three children and lives with his wife, Connie, and their son in Newton, Massachusetts. He enjoys gardening, long walks, foreign films and opera.

Tom can be reached at 617-964-6404 or via  email .
Are you finding our newsletters useful? If so, can you think of any friends and family with whom you would like to share them? You can either just: 1) Reply to us with the new email address(es), once you have their permission, or 2) Click the Forward this email link below. 

Securities offered through Parkland Securities, LLC. Member FINRA/SIPC. Investment advisory services offered through Sigma Planning Corporation, a registered investment advisor. DeVol Insurance & Financial Services is independent of Parkland Securities, LLC and SPC.

PHOTO CREDITS: Images from Pixabay: S. Hermann & F. Richter; skeeze; jggrz; flockine; Couleur.

View my profile on LinkedIn