Author Topic: Donor Advised Funds for Charitable Giving  (Read 6576 times)

Olórin

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Donor Advised Funds for Charitable Giving
« on: June 17, 2014, 03:36:46 PM »
I’m excited to start giving away more money as I transition from my grad program back into the working world, and I have a few questions about Donor-Advised Funds (an excellent vehicle for charitable contributions).

Here’s a link explaining what Donor Advised Funds are and why they are so awesome for giving away money and assets, as well as the fact that they can continue to grow as an investment after you donate (you might have noticed that JLCollins has promoted them as well): http://en.wikipedia.org/wiki/Donor_advised_fund

Who among you Mustachians uses Donor Advised Funds?  Which is the best one in your opinion (lowest fees, least restrictions on where you can give your money)?  Does your organization impose limitations on where your money can go (other than the obvious that it has to be a charity, etc)?  Has anyone ever had an experience where their DAF did not grant the charitable gift that they “recommended”?  I know this is theoretically possible as they technically have the final say, but I’m wondering how often it happens in reality.

I know a decent amount about Vanguard’s DAF, and I like the look of it for the most part.  They do charge a 0.6% yearly fee for managing everything, which isn’t bad considering all they are doing, but I’m wondering if there are many cheaper ones.  For example, I know the PCA (Presb. Church of America - http://www.pcafoundation.com/services/individuals/advise-and-consult-fund/) has one that doesn’t charge any fees, and I’m leaning towards it, though I do like the advantage of Vanguard’s more extensive infrastructure and online management options. 

Thoughts?  Suggestions? 

(Since this type of charitable giving directly ties into investing, I put it here.  Let me know if it should be elsewhere.)

pattertall

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Re: Donor Advised Funds for Charitable Giving
« Reply #1 on: June 17, 2014, 04:19:25 PM »
I've used the Schwab Charitable Fund (http://www.schwabcharitable.org/public/charitable/home), which seems to be very similar to Vanguard.  It's also a 0.6% fee, at least on the first $500K.  The options for investing the funds are somewhat limited, but there is a low expense rate total stock market index fund, and that's all I need.  I only chose Schwab since it was easiest as I already had an account there, but it's worked well.

I have made donations to a handful of charities and never had any problems.  My understanding is that the donation will typically be approved to any legitimate charity registered in the US, but obviously there is not a 100% guarantee on that.

Overall, the donor-advised fund has been a nice way to build up a pool of money for future charitable giving while my marginal tax rate is very high.  I'm close to FI and at some point in the future plan on having much lower earnings, at which point I will likely focus most of my future donations through the money that has already accumulated in the fund.

Olórin

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Re: Donor Advised Funds for Charitable Giving
« Reply #2 on: June 17, 2014, 05:37:05 PM »
Thanks for sharing!  I've already got some stuff with Schwab, so the ease of using their fund might trump other options.

Anyone else have a fund they like?

curler

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Re: Donor Advised Funds for Charitable Giving
« Reply #3 on: June 17, 2014, 09:04:24 PM »
Though I don't have a donor advised fund, I would suggest you consider your local community foundation.  Particularly if you plan on keeping your philanthropy dollars local, they will be able to help you throughout the process.  Their fees will almost certainly be higher than one of the big names, as they can't offer the same economies of scale, but I think they may have benefits that can make it worthwhile.

Nords

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Re: Donor Advised Funds for Charitable Giving
« Reply #4 on: June 20, 2014, 08:50:16 PM »
Thanks for sharing!  I've already got some stuff with Schwab, so the ease of using their fund might trump other options.
Anyone else have a fund they like?
Every DAF operates pretty much the same way, and they "approve" their grants largely from the IRS' list of 501(c)3 charities.  About the only restriction you'd face is if the charity is classified as a privately-funded foundation, or if it's an international charity without an American subsidiary.

You could try Fidelity's fund just as easily as Schwab or Vanguard.  They're all "good enough", so go for your convenience. 

I'll put in another vote for giving locally, but a DAF will allow you to retain your anonymity.  Not all community foundations offer that feature.

Another option is Donors Choose, which wraps a charitable foundation around your grants to school teachers.  It's not strictly anonymous but I hear that a donor named Alice Cooper is doing a lot of good there...

Trirod

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Re: Donor Advised Funds for Charitable Giving
« Reply #5 on: June 30, 2014, 02:20:09 PM »
Here's another thought - just give directly to charities where the funds can be put to work right away, and avoid the expense of the DAF middleman.

I'm a big fan of a donor advised fund for somebody close to retirement where they can make large contributions taking advantage of their high marginal tax rates (which they will not have for much longer).  I may be missing something, but I'm not sure of the advantage for somebody just getting into the workforce?

Olórin

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Re: Donor Advised Funds for Charitable Giving
« Reply #6 on: June 30, 2014, 03:01:01 PM »
The advantage is the significant tax savings of donating assets that have grown (because you eliminate capital gains by donating assets that have appreciated).  Instead of selling it off, paying taxes, and then donating the proceeds, you transfer the stock or whatever directly to the DAF, which then sells it, retains the entire value without paying taxes on it, and gives it to the charity of your choice.  Local charities cannot usually receive donations of stocks or funds, but they can receive the check that your personal DAF sends out for you.  This allows you to donate more money while simultaneously getting a larger tax deduction.

Also, as Nords pointed out, DAFs allow one to give anonymously as well as in other creative ways (think setting up matching donations, or providing an organization with a below-market-rate mortgage, etc).

curler

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Re: Donor Advised Funds for Charitable Giving
« Reply #7 on: July 01, 2014, 09:36:36 PM »
Local charities cannot usually receive donations of stocks or funds, but they can receive the check that your personal DAF sends out for you.
I wouldn't assume this is true.  My local food bank, for example, accepts donations of stock, as does one of the two other non-profits I donate to.

jpdcpajd

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Re: Donor Advised Funds for Charitable Giving
« Reply #8 on: July 01, 2014, 09:56:29 PM »
IRS announced today simpler application process for Private foundation status 3 page app $400

RFAAOATB

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Re: Donor Advised Funds for Charitable Giving
« Reply #9 on: July 02, 2014, 08:24:53 AM »
While charities may focus on your pet cause, the number one charity in need is the United States Government.  They realize that they get more charitable giving across the country by providing tax advantages, however they are depriving themselves and the social programs they fund of tax income.

Unless you are really focused on your pet cause, wouldn't paying taxes from taxable account distributions be as benevolent as giving to charity?

TreeTired

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Re: Donor Advised Funds for Charitable Giving
« Reply #10 on: July 02, 2014, 09:26:12 AM »
I just donated a few appreciated shares to a very small charity.    The director gave me their account number at TD Ameritrade and I filled out a form, sent it to Schwab and they wired the shares over.  It was easy.   I also had an account with the Fidelity Charitable Gift fund for many years when I was working.  I liked that too.  Only glitch was after I stopped working and was giving all the money away.  I think I had about $150 left in the fund and was thinking about who to give it to and the money disappeared.  They took it as their fee.  Pissed me off, but when I called and discussed it with them it made sense.

ProfWinkie

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Re: Donor Advised Funds for Charitable Giving
« Reply #11 on: July 02, 2014, 11:04:12 AM »
Many good causes that have planned giving programs. You may wish to consider them as well