Donor-Advised Fund

[RunningBum]

I think it's greater of 0.6% or $100 annual fee at Fido.

I misread their fee page, $500 is for corporate accounts. You are right, $100 for individual accts.

 

[JoeWras]

No fee if the balance is 0? For Fido I see an annual fee charge of the greater of 0.6% or (edit $100. Assume you probably wouldn't do this with VG because of the higher minimums but I think they have similar. What if you have $5 because a dividend slipped in before your grant got paid?

VGC has a low balance policy. Simply, if your balance is below $15k, they assess a $250 fee. If your balance is below $250, they close the account.

From their policy booklet:

Account advisors who wish to avoid the maintenance
fee should ensure that account balances are safely
above $15,000 by the beginning of March. If an account
holds less than $250 at the time the fee is assessed,
the entire balance will be charged and the account will
be closed.
https://cdn.vcapps.org/sites/default/files/upload/Final_2017_P&G_4.pdf

I spoke to an agent there about this and she said that some people use the March date to full effect, i.e. they donate at the beginning of the year, reach the minimum, and then drain it out the rest of the year. That is allowed.

My gut feel about that is they picked March intentionally to try to spread some activity out to the early first 1/2 of the year.

 

[jebmke]

If that's what you want, then it's good.

But I love seeing the available funds grow in the DAF. Sure, it means FIDO makes a little from their fee, but the balance grows a lot more than that. So I'm able to make more generous gifts than I could otherwise. That works better for me.

Absent tax rate arbitrage it is more cost effective to have the growth outside the DAF.

 

[audreyh1]

I was just reviewing the minimum grant requirements for our Fidelity Charitable DAF so thought I would share it here.

Minimum Fidelity Charitable grant activity
Historically, Fidelity Charitable has made grants of about 20% of average net total assets to charities each year. The formal grantmaking policy requires that minimum annual grants, on an overall basis, be greater than 5% of average net assets on a fiscal five-year rolling basis. If this requirement is not met in a fiscal year, Fidelity Charitable will ask for grant recommendations from Giving Accounts that have not had grant activity of at least 5% of the Giving Account’s average net assets over the same five-year period. If Account Holders on these Giving Accounts do not make grant recommendations within 60 days, Fidelity Charitable will grant the required amounts out in accordance with the Fidelity Charitable Trustees’ Initiative (described on page 28), in its sole discretion.

Minimum Giving Account grant activity
Active charitable grantmaking is required for every Giving Account. If no grants are distributed from a Giving Account for three years, Fidelity Charitable will make every effort to contact the Account Holder to encourage grant recommendation(s) from the Giving Account. For every year thereafter in which no grants are recommended by an Account Holder, Fidelity Charitable will make grants from the Giving Account to IRS-qualified public charities approved by the Trustees of Fidelity Charitable. If a Giving Account has entered its seventh year of inactivity (i.e., no grants recommended by an Account Holder), Fidelity Charitable will consider the Giving Account to be abandoned and will grant the entire balance of the Giving Account in accordance with the Fidelity Charitable Trustees’ Initiative (described on page 28).

https://www.fidelitycharitable.org/docs/Giving-Account-Policy-Guidelines.pdf

Fidelity has enough donors that you can probably get away without gifting for a couple of years but have to do something by year three. Even then, you can get away with a lower grant% as long as Fidelity Charitable overall meets the 5% guideline for grants. And historically grants have been around 20% of assets.

We had been above the 5% requirement grant guideline every year, but since we have been front-loading the DAF recently - gifting way ahead of our annual budget via appreciated securities - I was just checking whether next year's gifting still met the requirements.

We have an $ amount set aside for charitable donations in our annual budget. But due to eliminating a long-held legacy stock position, it was more beneficial tax wise to gift from appreciated securities. I think we may have front-loaded like 10 years worth!

 

[RetireAge50]

We have been building up our DAF over the last few years in anticipation of retirement. We have at least 5 years maybe 10 of anticipated giving in there. Nice not having a giving line item in our budget during our early years of retirement.

 

[jjquantz]

Thanks to everyone for the discussion of DAFs, DW and I just set one up. We had a bit of a financial windfall this year that was going to bump up the tax bill and with the uncertainty surrounding the new tax changes we thought that a deduction in the hand this year was a reasonable choice. This discussion gave me just the nudge I need to start the process.

 

[harley]

VGC has a low balance policy. Simply, if your balance is below $15k, they assess a $250 fee. If your balance is below $250, they close the account.

From their policy booklet:


I spoke to an agent there about this and she said that some people use the March date to full effect, i.e. they donate at the beginning of the year, reach the minimum, and then drain it out the rest of the year. That is allowed.

My gut feel about that is they picked March intentionally to try to spread some activity out to the early first 1/2 of the year.

I set up a DAF with VG a couple of days ago, although it's not funded yet. Moving the appreciated stock from TDAmeritrade takes awhile, but I'm outside of their two week time limit so it should be OK.

I went with VG because that's where most of our accounts are, but seeing their restrictions I'm wondering if maybe Fido would be a better choice in the long run. Is it possible to transfer a DAF from one company to another? Or would I just have to wait until I've donated it all away and start another one?

 

[jonat]

Is it possible to transfer a DAF from one company to another?

I would think not, since you no longer control the funds.

 

[RunningBum]

Fidelity told me it was very possible to transfer. I'm going to check it out after the start of the year, when they are less busy. You give a grant from your VG account to your new account. I'll call Fido and make sure I have the details.

 

[Gill]

I set up a DAF with VG a couple of days ago, although it's not funded yet. Moving the appreciated stock from TDAmeritrade takes awhile, but I'm outside of their two week time limit so it should be OK.

I went with VG because that's where most of our accounts are, but seeing their restrictions I'm wondering if maybe Fido would be a better choice in the long run. Is it possible to transfer a DAF from one company to another? Or would I just have to wait until I've donated it all away and start another one?

Yes, it is very possible and I've just done it. I had mine at Fidelity and decided to consolidate it with my personal accounts at Vanguard. You simply open a DAF at Vanguard and then make a grant from your Fidelity a/c to the new Vanguard account. They are both charities and so they qualify for the grant.
Gill

 

[jonat]

Ah, yes, that makes sense.

 

[harley]

Cool! Thanks all.

 

[NgineER]

Signed up for one as well. With fidelity where my ESPP is. That transfer was quick. Trying to transfer some stocks from other accounts requires some more effort, medallion signature etc. paper certificates but hope to get it done before the new year.

 

[harley]

My transfer from TDAmeritrade to VG didn't require a Medallion guarantee or even a notary. Strange, but I'll take it. Assuming they are telling me the truth and it all actually gets processed. I called to double check, so hopefully they got it right.

 

[friar1610]

From what I understand, QCDs are not affected by the new tax bill (although I suppose nobody knows what's included in the 500 pages!) So it seems to me that for those of us old enough to be taking RMDs, using QCDs for charitable donations will accomplish much the same as DAFs going forward. (Clarification: meaning for those of us for whom the new larger standard deduction will eliminate the need/ability to itemize.)

If I've got this all wrong Id like to hear about it.

 

[JoeWras]

From what I understand, QCDs are not affected by the new tax bill (although I suppose nobody knows what's included in the 500 pages!) So it seems to me that for those of us old enough to be taking RMDs, using QCDs for charitable donations will accomplish much the same as DAFs going forward. (Clarification: meaning for those of us for whom the new larger standard deduction will eliminate the need/ability to itemize.)

If I've got this all wrong Id like to hear about it.

From my reading, I think you have it right. I'm still 15 years away from RMDs, but will likely use QCDs when the time comes instead of the DAF, assuming the code is similar and I'm not dead.

 

[Nords]

No fee if the balance is 0? For Fido I see an annual fee charge of the greater of 0.6% or (edit $100. Assume you probably wouldn't do this with VG because of the higher minimums but I think they have similar. What if you have $5 because a dividend slipped in before your grant got paid?

I've read that too, but for whatever reason I've never been charged for shooting funds through the account. Five years ago we used to have a substantial balance between one years' distributions and the next, and the expense ratio was regularly deducted from the balance.

I've run the donations through the money-market fund, so apparently there's never been enough interest to show up as a credit.

Now after several years of zero balance (except for the few days between donating to the fund and distributing it to the military-friendly charities) I've never been charged a fee. It could be a mistake or Fidelity could've decided to give us a free pass, but they've never mentioned it and I've never asked.

 

[RunningBum]

Last year I opened a DAF at VG to make sure my VG funds were transferred over before EOY, to take a 2017 deduction. But I wanted the lower minimum grants at Fido (or Schwab). Today I called to verify that I could transfer it over, and how to do it. They assured me I could, and it seems very easy.


In case anyone else is looking to do the same, here is the process:


I opened a Fidelity DAF, and got an account #.


Then I went to my VG DAF, and submitted a grant request for the entire balance to go to Fidelity Charitable (the Fido Rep said to be sure to use the one with Tax ID 11-0303001), labeled the purpose as "Other" and put my Fido giving account name and acct number in the text box that appeared, to make sure Fido puts it in my account, and not their general fund.


I'll watch at VG for the grant to be approved and funds transferred, and then within a few days the funds should show in my Fido DAF. That is my only concern, that Fido would put it in their general fund, but I saved a copy of the grant request with my acct # as proof of intent, and have no reason to believe they wouldn't honor it.

 

[youbet]

So it seems to me that for those of us old enough to be taking RMDs, using QCDs for charitable donations will accomplish much the same as DAFs going forward.

QCD's are the only way to go for the RMD crowd. They directly reduce income dollar for dollar. DAF's only result in a charitable deduction saving you taxes only at your marginal tax rate.

Contributions to DAF's are not allowed as QCD's (unfortunately).

 

[RunningBum]

QCD's are the only way to go for the RMD crowd. They directly reduce income dollar for dollar. DAF's only result in a charitable deduction saving you taxes only at your marginal tax rate.

Contributions to DAF's are not allowed as QCD's (unfortunately).

The benefit of a QCD is that you can reduce your AGI, potentially reducing how much of your SS benefit is taxed and reducing the threshold for other deductions like medical expenses. Otherwise, reducing in income dollar for dollar or taking a deduction at your marginal tax rate amount to the same thing.

A DAF has a further advantage of being able to contribute appreciated securities, which in effect gives you a potentially larger tax break. It may work better to just take your RMD as income and instead donate an appreciated security, perhaps through a DAF. I certainly wouldn't say that a QCD is the "only way to go" unless I'm missing another advantage.

Kitces would seem to agree: https://www.kitces.com/blog/ira-qua...tisfy-rmd-vs-donating-appreciated-securities/

 

[audreyh1]

QCD's are the only way to go for the RMD crowd. They directly reduce income dollar for dollar. DAF's only result in a charitable deduction saving you taxes only at your marginal tax rate.

Contributions to DAF's are not allowed as QCD's (unfortunately).

That’s not exactly correct, because when you donate appreciated securities to a DAF, the capital gains income is not recognized AND you get to deduct the fair market value of the donation on schedule A.

 

[youbet]

That’s not exactly correct, because when you donate appreciated securities to a DAF, the capital gains income is not recognized AND you get to deduct the fair market value of the donation on schedule A.

Yes..... but in the examples I was working for my own situation, when I still have to pay the tax on the RMD (which happens despite donating to the DAF), I was better off using the QCD which virtually reduced the RMD dollar for dollar. Maybe it's based on the profitability-multiple of securities I'd consider contributing to the DAF or maybe I just need to sharpen my pencil...... But thanks for suggesting I give it another look!

 

[audreyh1]

Yes..... but in the examples I was working for my own situation, when I still have to pay the tax on the RMD (which happens despite donating to the DAF), I was better off using the QCD which virtually reduced the RMD dollar for dollar. Maybe it's based on the profitability-multiple of securities I'd consider contributing to the DAF or maybe I just need to sharpen my pencil...... But thanks for suggesting I give it another look!

Well you can’t donate appreciated securities from your IRA - so that’s a NOP.

It’s really a case of the QCD being useful to reduce RMDs and the DAF being particularly useful for donating appreciated securities as its set up to be very straightforward for that purpose.

So it really depends on the charitable gifting goal and source of funds.

I imagine that once we reach RMD age we’ll be taking more advantage of the QCD approach although I shudder to experience the loss of anonymity.

 

[Rosie]

Last year I opened a DAF at VG to make sure my VG funds were transferred over before EOY, to take a 2017 deduction. But I wanted the lower minimum grants at Fido (or Schwab). Today I called to verify that I could transfer it over, and how to do it. They assured me I could, and it seems very easy.

In case anyone else is looking to do the same, here is the process:

I opened a Fidelity DAF, and got an account #.

Then I went to my VG DAF, and submitted a grant request for the entire balance to go to Fidelity Charitable (the Fido Rep said to be sure to use the one with Tax ID 11-0303001), labeled the purpose as "Other" and put my Fido giving account name and acct number in the text box that appeared, to make sure Fido puts it in my account, and not their general fund.

I'll watch at VG for the grant to be approved and funds transferred, and then within a few days the funds should show in my Fido DAF. That is my only concern, that Fido would put it in their general fund, but I saved a copy of the grant request with my acct # as proof of intent, and have no reason to believe they wouldn't honor it.

Hi RunningBum, thanks for the info above.

Like you, I opened a DAF at VG last month. But I too prefer the lower grant minimum at Fido. I'd rather give a recurring gift of, say, $50 or $100/mo to a charity, rather than $500 or $1000 in one fell swoop. So I plan to follow your handy instructions.

Did the transfer of your DAF from VG Charitable to Fidelity Charitable go as planned, or is it still in process? Anything I should look out for?

 

[RunningBum]

Hi RunningBum, thanks for the info above.

Like you, I opened a DAF at VG last month. But I too prefer the lower grant minimum at Fido. I'd rather give a recurring gift of, say, $50 or $100/mo to a charity, rather than $500 or $1000 in one fell swoop. So I plan to follow your handy instructions.

Did the transfer of your DAF from VG Charitable to Fidelity Charitable go as planned, or is it still in process? Anything I should look out for?

It's still in process, but it's moved from Pending to Approved. The funds are still in my account at VG but now that it's approved I'd expect them to be moved early next week.