Today, I’d like to CONCLUDE our video series on different types of accounts investors should open…
First, let’s discuss a Donor Advised Fund (OR A DAFDAF): A DAF is a charitable giving vehicle that allows individuals to deposit assets in a public charity account for donation to charity over time. The donor gets an immediate tax deduction when making the contribution to the DAF and can still control how the funds are invested and distributed to charity. A DAF can be opened at a variety of brokerage firms or at some nonprofit organizations.
While many frum families give donations directly to charity, I have seen many people utilize a DAF. They are extremely useful for someone holding a security with no cost basis or a highly appreciated stock. If that person needs to contribute a large amount of money, say to a building campaign, instead of donating cash they can take a highly appreciated security or those with no cost basis and move them directly to a DAF. This allows the donor to circumvent the tax liability from selling these positions, gives them the tax deduction for their donation, and benefits the charity of their choice.
Next, there is a Health Savings Account (or HSA): An HSA is a tax-advantaged savings account paired with a high-deductible health insurance plan. An HSA is a rarity in that it is “triple tax free.” This means that it allows you to set aside money on a pre-tax basis to pay for qualified medical expenses, the funds can be invested and will grow tax deferred, and if used to pay for qualified medical expenses you don’t pay tax on the gains. However, you must be covered by a qualified high-deductible health plan through your employer or certain types of ACA plans in order to open and contribute to an HSA account.
To wrap up this video series, let’s discuss What’s important to you? Every family has its list of priorities. This is especially true within the Orthodox community, where spending patterns and communal obligations impact how we manage our finances. Viewers of this video series should take the time to reflect on what is important in their life from a religious and familial perspective. Then work with their team of trusted advisors to utilize the right accounts to achieve those goals. Understanding the types of accounts that are available to you, and funding those accounts accordingly, is foundational to effectively managing your funds and reaching your financial goals.