Charitable Planning for Millennials and the use of Donor-Advised Funds by Jack O'Connor and John S. Adams of UBS Financial

Charitable Planning for Millennials and the Use of Donor-Advised Funds

By Jack O’Connor, CFP® and John S. Adams, CFP®, UBS Financial Services

Jack O'Connor and John S.Adams UBS Financial ServicesMost millennials express their commitment to helping non-profits through volunteering either in non-profit activities or by serving on boards and through financial donations. There are several planning tools that Millennials can use that go far beyond making a routine contribution. Here we will talk about three tools Millennials can use for improving organization of charitable activities and long-term impact. This can be especially useful for people that have “sudden wealth” due to sale of a company, real estate, or public stock.

Which passions and causes will take you furthest with your philanthropy? Your philanthropic vision begins to take form when your passion and motivation meet your skills and resources. Meaningful philanthropy requires asking difficult questions and making strategic choices for each gift to be impactful. Diving deeper can help you focus on specifically what you hope to achieve, where and for whom. As a starting point, we recommend these questions to guide and provide clarity to you as your philanthropic vision takes shape.

The first question you might ask is “who will I help?”. This can be certain age groups, genders, populations, or socioeconomic communities. You then might ask “what issue will I focus on?” This can be a large range of needs such as health, environmental concerns, social justice, or educational opportunities. The third question might be “where will I act?”. Are you focused on home or abroad, and at the global, regional, national, or local level?

In addition to giving intentionally for maximum impact, it is smart to be familiar with charitable tools at your disposal. Many of our clients use a Donor-Advised Fund (DAF) as a repository for their charitable donations.

DAFs are offered by multiple investment companies and community foundations and we use several of them. Like with any investment account it is best to ask your Financial Advisor about any fees in advance and to compare vendors if possible.

UBS Donor Advised Funds

Instead of simply giving cash to a charity, many people give from taxable stock accounts or IRAs. If a donor funds a DAF with cash, the donor may deduct the gift up to 60% of their adjusted gross income (AGI) for the year and 30% for gifts of long-term capital gain property (like closely held business interests or publicly traded securities).1 If the donor has a low cost-basis in an asset and has significant unrealized gains the potential benefits of donating them to a DAF can be enormous. This allows the donor to avoid paying capital gains on the donated securities as well as reducing their AGI.

The use of a DAF provides you with a multi-faceted tool. All DAFs are qualified charities; they are pass-through repositories with a “valve” that you can control as the donor. This means that you can still gift stock and obtain the same tax deduction and gain forgiveness as giving directly to a charity. You can also gift from an IRA. Any stock you place in a DAF are sold and turned to cash as received, then reinvested in your selected investment option until you direct the DAF to distribute to your chosen charities. There is no specific requirement about when you need to distribute from your DAF, so assets can accumulate and earn considerable interest while awaiting distribution.

One of the primary reasons we advise clients to use a DAF is ease of use and record-keeping. Donors are provided with an online portal where they can keep track of their investment allocations, amount of donations, a list of donations made to charities from the fund, and tools to locate charities to which they may be interested in donating.

A second reason is that it allows our clients to think long-term and to be “impact philanthropists”. A large sum can build up in a DAF that can be gifted to favorite charitable organizations over many years. This approach allows you to participate with and monitor the charity. If initial contributions are well used, then you can follow with additional gifts from your DAF.

The third is that for those of us that are deeply committed to charities and know we will be after retirement; the DAF can be thought of like a charitable mega-retirement account. It can be drawn on during retirement years (Or years when taking time off work for non-profit activities). While we can’t draw on the DAF for personal needs, the DAF is available to generate charitable contributions on an on-going basis and to be used for gifting to charities when you are not working.

The use of a DAF is one of the most useful tools we have in planning for our Millennial clients that have the goal of engaging as “impact philanthropists” during their lifetimes.


Article by Jack O’Connor, CFP® and John S. Adams, CFP®, who are members of the Arbor Group at UBS Financial Services Inc. (Member FINRA/SIPC) and can be reached at: 206-689-3136.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the U.S.

[1] U.S. Department of the Treasury. Internal Revenue Service. (2021). Limits on deductions Retrieved from

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