﻿Giving has always been a big part of our family. Even when we didn’t have much growing up,
my parents made it a priority to tithe 10% of our income to church. And this is a value I want
to pass onto my children. So, how excited was I when I learned about the Donor-Advised Fund? Hi,
if you are new to the channel, my name is Tae from Financial Tortoise - a channel dedicated
to helping the Sandwich Generation reach Financial Security. In this video I want to talk about the
Donor-Advised Fund, also known as DAF. I’ve been funding it for the past several years and
it’s been an amazing tool in my giving. Not only do you feel like a Billionaire - have you ever
heard of Bill & Melinda Gates Foundation? Well - how about Tae & Monnica Kim Foundation? We are
kind of in the same ballpark - plus or minus about $50 billion in difference.
But the main benefit is that there are some pretty cool
tax and investment mechanisms you can take advantage of, so you can maximize your giving.
Many of you guys may be asking at this point. Why in the world is Tae talking about this thing
called Donor-Advised Fund? Isn’t this a personal finance youtube channel? Where’s the video on
making money and getting rich?! Don’t worry - I have plenty of videos that will cover those
topics. However, I do believe that once many of us cross the point of enough - enough money to take
care of our family, our retirement and a sense of peace, we feel like we want to make a positive
impact on the world around us through effective giving. If you can bear with me for a minute, I
want to share with you a bit of a personal story. As my last job in the Army, I was stationed with
a unit located just south of the Demilitarized Zone in South Korea. Also known as the DMZ. As
one of the Division Intelligence Officers, I was responsible for reviewing all the intelligence
reports from the night before and highlighting any relevant items for our Division Commander.
One day, as I was reviewing the reports like any other, a North Korean defector report caught my
eye. Apparently a female defector had crossed over the night before and had been detained
and interrogated by the South Korean military. It showed a picture of a girl about my age, in
raggedy old clothes, that had clearly been through a lot. However, what caught my eyes most was the
birth year. I was 27 years old at the time, and she was exactly my age. That memory sticks out
to me because she represented what my life could have been if my grandfather hadn’t fled from North
Korea with my 2 year old mother at the height of the Korean War. We were born the same year,
and not too far from each other - both having been born on the Korean Peninsula. Yet, here we were on
two completely different sides. One having to run for her life while the other, able to run with all
the opportunities life has provided. For me, when I step back and look at history more broadley - I
feel so blessed to have been given the opportunity to even fathom the idea of financial security or
financial independence. These are concepts that were not even fathomable to most of mankind
throughout all of history. An average person even a hundred years ago was struggling just
to survive. But today, many of us are able to enjoy an immeasurable number of opportunities.
I give financially and I want to pass on that value to my children because it reminds me daily
the immense opportunities that I have, that many in the world are not able to enjoy. If you are
watching YouTube videos like this and are managing your money well, it is not if you will grow your
net worth, but when. And as our net worth grows, and we are able to have enough to meet our basic
needs for our children as well as for our aging parents, effective giving could be a good outlet
for many of us. So this is why I’m so excited to talk about the Donor-Advised Fund. Because,
not only is it a smart mechanism to support my values of giving, I can do it with style.
A simple way to think about a Donor-Advised Fund is to think of it like a mini foundation.
Ever heard of Bill & Melinda Gates Foundation or the Walton Family Foundation? By opening up a DAF,
you are essentially creating your own personal foundation. It is a charitable investment
account created for the sole purpose of supporting charitable organizations you care about. So where
can you open up a Donor-Advised Fund? but first if you're enjoying this video and you want to learn
more about personal finance and navigating life as a sandwich generation, I would appreciate it
if you subscribe and hit the like button, because that would really help out the channel. Two good
options are Vanguard and Fidelity. Though I love Vanguard for its low cost index funds,
I actually went with Fidelity when it came to my Donor-Advised Fund. The reason is because
Vanguard has a $25K minimum initial contribution and a $5,000 minimum for additional contributions.
Fidelity on the other hand has no minimum for initial contribution
as well as for additional contribution. I didn’t have $25,000 lying around and wanted the ability
to contribute less than $5,000 into the fund if I wanted to. Also, Fidelity had good low cost index
funds as an option within the Donor-Advised Fund. Now, what are the benefits of using a
Donor-Advised Fund for your giving? Let me share with you 5 pretty convincing ones. First one
is you get to name it. Just like a Billionaire. And because I’m pretty narcissistic, I named ours
the Tae & Monica Kim Foundation. Yes, judge me all you want. The second benefit of using a DAF
is the immediate Tax Deduction. This is definitely a good problem to have,
but there might be years when you want to make a contribution to lower your taxable income,
but you don’t have a specific non-profit or organization to give to yet. The great aspect of
a Donor-Advised Fund is that you can fund your DAF whenever the tax benefits make most sense to you
without thinking about who you are giving money to and when. This ability to time your deduction can
be a great tool in your tax management strategy. Number three is you can contribute assets directly
into the fund. If you have stocks or assets that have appreciated in value,
you can move them directly into your Donor-Advised Fund. You get tax deduction for their full market
value and you don’t have to pay any capital gains taxes on the gain. You get to kill two birds with
one stone - no taxes and more money for your mini foundation. Also down the line, if you have 401K
or Traditional IRAs that you need to withdraw because of RMD, Required Minimum Distribution,
you can roll part or all of it directly into your DAF, tax free. Number four is my favorite. This is
where your DAF can function as a long-term giving machine like major foundations. The money that is
deposited into the account doesn’t need to just sit there. You can invest the money so that it
can grow for future giving. I have my DAF with Fidelity like I mentioned earlier. Within Fidelity
Charitable, there are several different investment options - thankfully there are good index options
which I went for. And like a good tax advantaged account, not only did you receive tax deduction
when you put money into it, it grows completely tax free. And you can add more money to your
foundation whenever you choose. I’ve been contributing to a DAF regularly for the
past several years, and I’m excited to see how it’s grown to more than I’ve deposited so far,
just like any of my other investment accounts. This will allow my wife and I the ability to give
more and continuously in the future towards causes that we strongly believe in. The fifth benefit of
DAF is that you get to decide which charities receive your money, how much and when. And this
can be done anytime. It can be done immediately after you deposit money into the DAF. Or it can
be done many years in the future after the money in DAF has grown. This is how you can give like
a Billionaire. One thing to note though, once you put your money into DAF, you can’t take it back.
It’s part of the fund now. You can control where the money goes, but it is no longer your personal
money. Thank you guys for watching. If you found value from this video, please hit the like button,
leave a comment and subscribe to the channel so that you don't miss out on any of my other
upcoming videos. I firmly believe that being part of the Sandwich Generation doesn't have
to mean financial stress. With careful planning and preparation, we can thrive during this stage
of life. Help me spread the knowledge. Thank you again and I'll see you in my next video.