If you’re a high-income W-2 earner—earning $300K, $500K, or more—you’ve probably thought about how to keep more of what you earn and do something meaningful with it. Taxes can feel like a black hole, especially when your income spikes due to bonuses, equity vesting, or stock sales. If you’re looking to reduce that tax hit while supporting causes you care about, there’s a smart, layered strategy that combines Donor-Advised Funds (DAFs), Charitable Remainder Unitrusts (CRUTs), and an Irrevocable Life Insurance Trust (ILIT). Together, they let you give, grow, and protect your wealth—for both your community and your family.
Let’s start with the DAF. It’s essentially a charitable investment account you fund now and grant from later. You contribute cash or assets—like appreciated stock, crypto, or even private equity—get an immediate tax deduction, and then decide when and where to distribute the funds. You open one through Fidelity, Schwab, Vanguard, or a community foundation. The contributions grow tax-free, and you recommend grants at your own pace. The best part? If you donate appreciated assets, you avoid capital gains tax and still deduct the full market value.
Case Study 1: Tech Executive With Stock Grants
Say Emily is a VP at a public tech company making $500K a year, with $150K in RSUs that have doubled in value. Instead of cashing out and paying capital gains, she donates $150K worth of stock to a DAF. She:
- Takes a $150K tax deduction this year
- Avoids tax on the unrealized gain
- Builds a charitable fund she can use to support organizations over time
This move instantly lowers her taxable income and sets her up for strategic giving. She doesn’t have to decide today where the money goes—she can take her time.
Now Add a CRUT to your Donor-advised Fund
If you’re selling a major asset—like a business, rental property, or large stock position—a CRUT can protect you from a serious tax hit. You transfer the asset to the trust before it sells, so the trust (a nonprofit entity) sells it tax-free. The proceeds are invested, and you (or a family member) get income from it annually for life or a set number of years. When the term ends, the remaining funds go to charity—often your DAF.
Case Study 2: Physician Couple with Real Estate Windfall
John and Maria are doctors with a rental property worth $2.5M and a low cost basis. If they sell it, they’d owe hundreds of thousands in taxes. Instead, they put the property into a CRUT, which sells it tax-free. The trust reinvests the money, and they receive annual income for 20 years. At the end of that period, the remainder goes to their DAF, which their kids can help manage as a family giving legacy. They get:
- Lifetime income
- A sizable upfront tax deduction
- No capital gains on the sale
- A long-term charitable legacy
Add an ILIT to your Donor-advised Fund and CRUT: Protecting the Heirs
Here’s where most people drop the ball: they build a smart charitable and tax-saving structure, but forget about wealth transfer and protection. That’s where an Irrevocable Life Insurance Trust (ILIT) comes in. If you’re shifting assets to charity via a CRUT or DAF, that’s wealth your heirs aren’t inheriting. But with an ILIT, you can replace that lost value tax-free.
You set up an ILIT, fund it with a life insurance policy, and make annual gifts to cover the premiums (which can be offset by your tax savings). The ILIT keeps the insurance outside of your taxable estate, and when you pass, the proceeds go to your heirs income- and estate-tax free.
Case Study 3: Business Owner Planning for Heirs
Carlos, a high-earning entrepreneur, sells his business through a CRUT. The CRUT gives him income and helps fund his future DAF donations. But he’s concerned his children will inherit less. So he creates an ILIT and buys a $3M second-to-die life insurance policy inside it. His CRUT helps free up cash for premiums. When he and his spouse pass, the ILIT pays out to the kids tax-free, replacing the wealth redirected to charity. That way:
- He gets tax savings now
- Gives meaningfully to causes he values
- Leaves his children financially secure
The Complete Picture: DAF + CRUT + ILIT
Here’s how these three strategies work together:
- DAF: Gives you immediate tax relief and long-term giving flexibility.
- CRUT: Converts taxable, illiquid assets into income and future charitable impact, while deferring capital gains.
- ILIT: Ensures your family inherits wealth, tax-free, even as you redirect other assets to charitable causes.
Why This Matters for High W-2 Earners
If you’re a high-income employee, your tax planning tools are limited. You don’t own the business. You can’t write off your lifestyle. But you can be strategic with your giving. These tools let you:
- Lower your tax burden
- Avoid capital gains on big assets
- Create income from charitable structures
- Grow and control your giving
- Protect your family’s inheritance
Final Thoughts
This is smart, efficient planning. You’re not just writing checks to nonprofits. You’re taking control of your giving strategy, protecting your family, and minimizing taxes all in one move. You don’t need $50 million to do this—these tools scale. Whether you’re donating $50K or $5M, there’s a way to make it work.
If you like this tax saving strategy and want to explore your own options, let us know we’ll be happy to discuss your situation and see if we can help you. Make sure to check out other articles on selling your business/large assets and capital gains: