Author Topic: Donor Advised Fund  (Read 1224 times)

AdrianC

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Donor Advised Fund
« on: November 22, 2019, 07:09:35 AM »
Anyone got one?
Good or bad experiences?

We're considering opening one at Vanguard. It has a 0.6% admin fee for <$500k. Uses typical cheap Vanguard funds for investment.

https://www.vanguardcharitable.org/

AdrianC

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Re: Donor Advised Fund
« Reply #1 on: November 22, 2019, 09:28:08 AM »
Google is my friend: this thread from May last year answers most of my questions:

https://forum.mrmoneymustache.com/investor-alley/who-is-your-daf-with/msg1992388/#msg1992388

Unless anyone has any updates?

Looks like Fidelity is better than Vanguard, which is a shame because Vanguard would be easier to transfer appreciated stock into (it's in a Vanguard brokerage).

chasesfish

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Re: Donor Advised Fund
« Reply #2 on: November 22, 2019, 09:36:22 AM »
I recommend Fidelity, much smaller grant sizes allowed.

The management fee you see is about the same between Vanguard, Fidelity, and Schwab.

Here's the best resource that MMM also quoted

https://www.physicianonfire.com/the-donor-advised-fund-a-win-win/

thedigitalone

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Re: Donor Advised Fund
« Reply #3 on: November 22, 2019, 02:25:05 PM »
We did this after reading the thread posted above last year.

We used Schwab since we already had an account there and you can make donations as small as $50. Simple to setup and just transferred stock in to fund the account.  Making donation "recommendations" is easy as putting in the charities tax ID and they receive a check in a week or so.  My wife's company will still match donations because we have the family name as part of the trust name, so double win.

Ockhamist

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Re: Donor Advised Fund
« Reply #4 on: November 22, 2019, 03:32:04 PM »
Anyone got one?
Good or bad experiences?

We're considering opening one at Vanguard. It has a 0.6% admin fee for <$500k. Uses typical cheap Vanguard funds for investment.

https://www.vanguardcharitable.org/

I have one with Fidelity.  Been with them for many years.  It has been a very good experience, no problems at all. 

Trudie

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Re: Donor Advised Fund
« Reply #5 on: November 22, 2019, 10:45:25 PM »
Started one a year ago with taxable annuity proceeds we inherited from my MIL’s estate which were unexpected and would have thrown us into a higher tax bracket so setting it up was a part of income tax planning.  We have TIAA so used TIAA Charitable.  We will start making grants in 2020, and I think it will be a key tool in periodically helping us stack our deductions.

seattlecyclone

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Re: Donor Advised Fund
« Reply #6 on: November 22, 2019, 10:57:14 PM »
We have a Vanguard DAF account. We're generally happy with it. Transferring shares from our Vanguard mutual fund account is a fully online process, which is great. The $500 minimum grant size hasn't been much of a problem for us, as we generally prefer to make a smaller number of more impactful donations rather than giving $50 here, $100 there, etc. For the rare occasion where we do want to make a smaller gift a credit card does the job nicely.

MustacheAndaHalf

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Re: Donor Advised Fund
« Reply #7 on: November 23, 2019, 04:36:18 AM »
Years ago even though almost all of my investments were at Vanguard, I setup a DAF at Fidelity Charitable.

Vanguard has a $25,000 minimum to open the account.  As you spend down the account, after you hit $5,000 your fees will always be $250/year.  That $250/year fee is 10% of a $2,500 account and 5% of a $5,000 account.  Vanguard Charitable isn't friendly to small accounts.

I picked Fidelity Charitable because of their $5,000 minimum and they allow smaller grant sizes.  At the time, I think Vanguard's minimum grant was $500.  Meaning you can't transfer less than $500 to a charity, while the Fidelity DAF allows $50 grants.  The cost structure is also more friendly, with a $100/year fee for accounts up to $16,600 (then it's 0.6%).


But regardless of your choice, look at making your DAF grants (money you send to charities) anonymous.  It dramatically reduces the junk mail you get from charities, since the receiving organization just knows it's from "Fidelity Charitable".  You can attach your name if you prefer, and keep your address revealed if you prefer, but I liked the anonymity.

AdrianC

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Re: Donor Advised Fund
« Reply #8 on: November 24, 2019, 12:39:23 PM »
Thanks very much everyone.

Looks like Fidelity is the way to go, though we might not be able to fund by years end with appreciated stock from our Vanguard brokerage, in which case we will open a Vanguard DAF, and maybe a Fidelity later. We’ll find out Monday.

One question I have not been able to answer: we can deduct up to 60% of AGI for cash contributions, 30% of AGI for appreciated stock - can we do 30% cash AND 30% stock?

seattlecyclone

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Re: Donor Advised Fund
« Reply #9 on: November 24, 2019, 01:22:24 PM »
One question I have not been able to answer: we can deduct up to 60% of AGI for cash contributions, 30% of AGI for appreciated stock - can we do 30% cash AND 30% stock?

I don't think so. If you do a combination of stock and cash donations, you can only deduct a total of 50% of your AGI. You could do 30/20, 25/25, etc. This is my understanding based on running through this IRS worksheet.

For most charities, your stock (and other capital asset) donations will go on Line 8, your donations of non-cash non-capital assets (used household goods given to Goodwill, etc.) will go on Line 9, and your cash donations will go on Line 10.

Suppose you put 30% of your AGI on each of Lines 8 and 10.

The 60% limit for cash contributions is applied on Lines 12-14.
Line 12: 60% of your AGI
Line 13: Smaller of Line 10 (30% of your AGI in this example) and Line 12 (60% of your AGI). This line is deductible on Schedule A.
Line 14: Any excess, carried over to next year (none in this case).

The 30% limit for capital asset donations is applied on Lines 26-31.
Line 26: 50% of your AGI.
Line 27: Sum of Lines 9-10 (in this example, Line 9 is zero, Line 10 is 30% of AGI, so you'll put down 30% of AGI).
Line 28: Subtract Line 27 from Line 26 (20% of AGI in this example).
Line 29: 30% of your AGI.
Line 30: Smallest of Line 8 (30% of AGI), Line 28 (20% of AGI), or Line 29 (30% of AGI). 20% of AGI it is.
Line 31: Carryover, Line 8 (30% of AGI) - Line 30 (20% of AGI) =  10% of AGI

As you can see, if you do a 30% of AGI cash donation and a 30% of AGI stock donation, you'll get to deduct the entire cash donation, two-thirds of the stock donation, and the final one-third of the stock donation will be carried forward until the next year.

AdrianC

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Re: Donor Advised Fund
« Reply #10 on: November 25, 2019, 09:53:17 AM »
Thanks, seattlecyclone. Makes sense.

We opened a Fidelity DAF this morning. It shouldn't be a problem funding it with appreciated ETFs from our Vanguard brokerage before year end.

jeromedawg

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Re: Donor Advised Fund
« Reply #11 on: November 25, 2019, 11:16:36 AM »
BTW: was curious but what is the advantage(s) of having a DAF versus doing stock contributions to an organization that accepts stock donations directly?

seattlecyclone

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Re: Donor Advised Fund
« Reply #12 on: November 25, 2019, 12:12:02 PM »
BTW: was curious but what is the advantage(s) of having a DAF versus doing stock contributions to an organization that accepts stock donations directly?

First off, the DAF means you only need to make one stock transfer. These transactions are often somewhat cumbersome. Much easier to do one stock transfer to the DAF and have them give cash to your charities than it is to track down the stock account info of each charity every time you want to make a donation.

Secondly, the DAF lets you decouple the year of the tax deduction from the year of the distribution to the charity. This can be helpful if you have a higher-income year and want to take a big charitable tax deduction that covers the next several years' worth of charitable giving.

bacchi

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Re: Donor Advised Fund
« Reply #13 on: November 25, 2019, 12:18:16 PM »
BTW: was curious but what is the advantage(s) of having a DAF versus doing stock contributions to an organization that accepts stock donations directly?

First off, the DAF means you only need to make one stock transfer. These transactions are often somewhat cumbersome. Much easier to do one stock transfer to the DAF and have them give cash to your charities than it is to track down the stock account info of each charity every time you want to make a donation.

Secondly, the DAF lets you decouple the year of the tax deduction from the year of the distribution to the charity. This can be helpful if you have a higher-income year and want to take a big charitable tax deduction that covers the next several years' worth of charitable giving.

And what MustacheAndaHalf wrote: It eliminates junk mail. I hate donating to a charity only to have my entire donation spent on junk mail trying to get me to donate more.

jeromedawg

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Re: Donor Advised Fund
« Reply #14 on: November 25, 2019, 01:33:22 PM »
BTW: was curious but what is the advantage(s) of having a DAF versus doing stock contributions to an organization that accepts stock donations directly?

First off, the DAF means you only need to make one stock transfer. These transactions are often somewhat cumbersome. Much easier to do one stock transfer to the DAF and have them give cash to your charities than it is to track down the stock account info of each charity every time you want to make a donation.

Secondly, the DAF lets you decouple the year of the tax deduction from the year of the distribution to the charity. This can be helpful if you have a higher-income year and want to take a big charitable tax deduction that covers the next several years' worth of charitable giving.

And what MustacheAndaHalf wrote: It eliminates junk mail. I hate donating to a charity only to have my entire donation spent on junk mail trying to get me to donate more.



BTW: was curious but what is the advantage(s) of having a DAF versus doing stock contributions to an organization that accepts stock donations directly?

First off, the DAF means you only need to make one stock transfer. These transactions are often somewhat cumbersome. Much easier to do one stock transfer to the DAF and have them give cash to your charities than it is to track down the stock account info of each charity every time you want to make a donation.

Secondly, the DAF lets you decouple the year of the tax deduction from the year of the distribution to the charity. This can be helpful if you have a higher-income year and want to take a big charitable tax deduction that covers the next several years' worth of charitable giving.

Thanks. I've been making direct stock contributions to my church the past couple years so yea I guess this would make it easier. Except the fees - that is a bit of a turn-off. I'd understand if I were transferring some S&P500 index funds from my Fidelity brokerage accounts, since those already have expense fees, etc. But if it's just individual stocks that I want to donate, where I'm not being assessed any fees, I could probably save a few bucks doing the direct stock donations. You are right though - having to fill out the partial transfer form is a bit of a pain. That said, I think I may hold off on the DAF for now... I didn't realize the expense fees part of it until after initiating opening haha oops!

Junk mail isn't an issue either since I don't consider mail from my church "junk" mail haha... of course, they don't mail stuff out to us as it is.
« Last Edit: November 25, 2019, 01:37:47 PM by jeromedawg »

Ockhamist

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Re: Donor Advised Fund
« Reply #15 on: November 25, 2019, 02:46:30 PM »
BTW: was curious but what is the advantage(s) of having a DAF versus doing stock contributions to an organization that accepts stock donations directly?

If you make any smaller donations, it's just one big stock transfer instead of several different small ones.  And with that big transfer you can now include donations to organizations that would not accept a stock donation.

Secondly, while you might end up paying a modest amount of fees overall for the DAF (with Fidelity at least they are pretty minimal), when you donate stock to a charity the charity has the expense of the transfer and sale.   They may or may not do that cost efficiently and so receiving a check from the DAF may cost them less.  What might amount to a few bucks expense on the donor side might save the charity many times that.

Lastly now that itemized deductions are limited and standard deductions are relatively high you can play this to your tax advantage. You could contribute the amount of your intended 2019 and 2020 (or more) donations all at once in 2019, and then disburse them as you will.   The tax deduction all comes when you donated to the DAF.   So maybe you itemize in 2019, and then in 2020 you don't make any donations and just take the standard deduction.
« Last Edit: November 25, 2019, 02:50:55 PM by Ockhamist »

Xlar

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Re: Donor Advised Fund
« Reply #16 on: November 25, 2019, 02:49:14 PM »
BTW: was curious but what is the advantage(s) of having a DAF versus doing stock contributions to an organization that accepts stock donations directly?

First off, the DAF means you only need to make one stock transfer. These transactions are often somewhat cumbersome. Much easier to do one stock transfer to the DAF and have them give cash to your charities than it is to track down the stock account info of each charity every time you want to make a donation.

Secondly, the DAF lets you decouple the year of the tax deduction from the year of the distribution to the charity. This can be helpful if you have a higher-income year and want to take a big charitable tax deduction that covers the next several years' worth of charitable giving.

I opened a DAF for the second reason. Before the tax laws changed I made a large lump sum donation to the DAF to take the tax deduction that year. Since then I have been donating from that fund as I do not donate enough each year to itemize currently.

MustacheAndaHalf

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Re: Donor Advised Fund
« Reply #17 on: November 26, 2019, 02:04:08 AM »
@AdrianC -  Okay, Fidelity should be a good choice.  From what I recall, you will need a "medallion signature guarantee" to transfer assets from Vanguard to Fidelity Charitable.  I think it just means stopping off at a notary with some forms and I.D.

AdrianC

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Re: Donor Advised Fund
« Reply #18 on: November 26, 2019, 04:45:10 AM »
The Vanguard form "Gift of Nonretirement Brokerage Assets to External Account" says a Medallion signature guarantee is required only if the recipient is an individual or the transfer exceeds $1M.

We are a smidge under the $1M ;-)

I'm kinda excited about this. Should have done it years ago.

chasesfish

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Re: Donor Advised Fund
« Reply #19 on: November 26, 2019, 06:17:51 AM »
The Vanguard form "Gift of Nonretirement Brokerage Assets to External Account" says a Medallion signature guarantee is required only if the recipient is an individual or the transfer exceeds $1M.

We are a smidge under the $1M ;-)

I'm kinda excited about this. Should have done it years ago.

Congratulations again, they are really incredible vehicles.

If you ever get tired of picking where to send the money, there are also local community foundations that do Donor Advised Funds, Field of Interest Funds, or even donor directed endowments for a charity.  You can make a grant from your Vanguard one to a local community foundation to establish a another donor advised fund.