Donor-Advised Fund

[jonat]

Fidelity Charitable is similar in this regard. We have used them for a few years now and are delighted. Even better, Fidelity has been waiving the DAF fees for us since we're a PAS client as well. I like the DAF so that I can choose how much of my contact information to provide, as a lot of charities, once you start, hound you endlessly. (But if your employer matches donations, you are probably required to get a receipt from the charity directly.)

DW and I changed our wills so that our assets go to our DAF. That means we can change charity beneficiaries and percentages as often as we want without difficulty or expense.

 

[Hermit]

So the charity would not have had funds set aside for that specific project?

They do have funds set aside for the project. On the other hand, they run a very "nimble" budget, so having cash in one pocket while other pockets are empty would be more a struggle for them. They are very good people and, IMHO, would always do the right thing. I thought this type of funding might make their life easier. The funds they have for the project are maintained in a bank account. I could have paid the fund fees and still done a better job for them. I did not set up this fund because it became apparent that it would not start until about the time I turned 70 1/2. The biggest hurdle has been getting approval through the county. They have just sent in their plans for the third time. Each time they address the issues the county has and each time the county comes up with new issues.

 

[athena53]

Thanks for this point about possibly accelerating 2018 giving by putting it in a DAF- hadn't thought of that. OTOH, I looked at my situation and it may not do much. Tell me if this makes sense.

My church pledge alone exceeds the proposed exemption for an individual filer ($12K proposed). I'll also have additional charitable deductions and lesser amounts for mortgage interest and property taxes. No subsidy issues; I've been on a private insurance policy with no subsidies and start Medicare on 1/1.

I've got a Fidelity DAF up and running but it looks like accelerating charitable donations won't help that much unless I happen to be in a higher tax bracket this year than next year. No way to predict that; my taxable income is highly dependent on investment results, and only some are under my control.

 

[jonat]

Just be aware that the charity has to be 501(c)(3) for a DAF grant, at least that's true of Fidelity Charitable. A lot of churches haven't registered for that.

 

[Clone]

The Fidelity DAF website has a simulator where you can lookup charities on their list. Both churches that we have been active in show up on the list, as well as a Makerspace that we helped get started several years ago. Here is a link to their site. Down at the bottom is a 'Try our Demo Account' link.

 

[athena53]

My church was also eligible as a recipient; no issues the first time I had a check sent to them. As always, YMMV.

 

[JoeWras]

Just be aware that the charity has to be 501(c)(3) for a DAF grant, at least that's true of Fidelity Charitable. A lot of churches haven't registered for that.

You can also used Guidestar and/or Charity Navigator to check on 501(c)3 status.

For DAFs, the org absolutely must be 501(c)(3). It is a non-starter after that.

For my church, I spoke with our treasurer first, and found out that they were already successfully getting contributions from both VGC and FC.

 

[JoeWras]

Thanks for this point about possibly accelerating 2018 giving by putting it in a DAF- hadn't thought of that. OTOH, I looked at my situation and it may not do much. Tell me if this makes sense.

My church pledge alone exceeds the proposed exemption for an individual filer ($12K proposed). I'll also have additional charitable deductions and lesser amounts for mortgage interest and property taxes. No subsidy issues; I've been on a private insurance policy with no subsidies and start Medicare on 1/1.

I've got a Fidelity DAF up and running but it looks like accelerating charitable donations won't help that much unless I happen to be in a higher tax bracket this year than next year. No way to predict that; my taxable income is highly dependent on investment results, and only some are under my control.

Athena, think about it a different way. The goal is to make the automatic exemption as minimal as possible in some years, and work for you others.

A DAF can help with this by allowing you to bunch in years. Let's say your giving (15k) plus taxes (5k) is 20K per year. You get 8K in deductions. For two years, that would 16K.

OK. Let's bunch your contributions. Year 1: Giving 0K, Tax 5K. Deductions are 0. Year 2: Giving 30K, tax 5K, deductions are 23K. By bunching contributions every other year, you are 7K of deductions ahead of that game. That's an extra few thousand saved in real money.

There is a caution to this approach. You have to watch the AGI limits on charitable giving (30% for appreciated stock, 50% overall).

 

[RunningBum]

Fidelity looks like where I want to set this up. I'm going to call them tomorrow and make sure I have time to transfer a VG appreciated fund to them by the end of the year. Their timeline recommends Nov 27 as the date to do this by, and that has passed. https://www.fidelitycharitable.org/what-you-can-donate/charitable-year-end-tax-deadlines.shtml If that say it's no problem, I'll still do it, but if there's any doubt, I'll go with Vanguard. It looks like I could switch over to Fidelity later by making a grant from Vanguard to my Fidelity DAF. A bit of a hassle but it has to happen this year to get the full tax break.

I called Fido today. They said they'd give it their best shot and likely would be able to get the transfer from outside done, but as it is past their deadline they couldn't guarantee it. It's a much bigger advantage for me to do it this year, so I'm going to open it at Vanguard. The Fido rep said it would be simple to get it transferred over to them later. I'll probably wait until after the first for that, both to make sure nothing changes the credit for this year, and to let the end of year rush pass.

 

[audreyh1]

I called Fido today. They said they'd give it their best shot and likely would be able to get the transfer from outside done, but as it is past their deadline they couldn't guarantee it. It's a much bigger advantage for me to do it this year, so I'm going to open it at Vanguard. The Fido rep said it would be simple to get it transferred over to them later. I'll probably wait until after the first for that, both to make sure nothing changes the credit for this year, and to let the end of year rush pass.

I didn’t know about the DAF transfer - as in gifting from one DAF to another. That’s good to know.

If your main intention was to gift this money over four years. You could still do just that. Give away all the money over four years and close the DAF.

You can always open another DAF later, and choose Fidelity then if you like.

 

[athena53]

Athena, think about it a different way. The goal is to make the automatic exemption as minimal as possible in some years, and work for you others.

A DAF can help with this by allowing you to bunch in years.

Thanks for the explanation! I definitely need to re-think this.

 

[RunningBum]

I didn’t know about the DAF transfer - as in gifting from one DAF to another. That’s good to know.

If your main intention was to gift this money over four years. You could still do just that. Give away all the money over four years and close the DAF.

You can always open another DAF later, and choose Fidelity then if you like.

Four years was just a thought when I was planning on doing this by lumping regular donations. I didn't want to give a larger one-time gift now. The DAF changed my strategy to donate a much larger amount now, and distribute the grants over time. I'll be set until at least QCD time (15 years), probably a lot longer since the fund will grow, even with doubling my giving.

If transferring it proves difficult, I'm OK leaving it at VG. I'd just like to be able to make smaller grants, which Fido allows, since I like the idea of making them anonymously. But between some reading I've done at bogleheads and other places, and what the rep told me today, it should not be a problem to just grant from the VG DAF to a new Fido DAF I'll open later.

I know I'm repeating myself, but this has really worked out well and I feel good about this. Between the tax law changes coming and limiting income in future years for the ACA subsidy, my incentive for giving was going to be reduced, and this was a way to set aside an amount for increased giving. It'll be close to a 40% write-off between fed and state deductions and avoiding the CG+state tax on the appreciated fund. With the money committed to the DAF I'm committed to giving more than I had been, so the tax savings will be passed on.

 

[flintnational]

Thank you to everyone for your explanation and input regarding the DAF. The DW and I opened a Vanguard DAF this morning. Since the funds are transferred into the DAF from our regular Vanguard account, the process was completed online in 20 or 30 minutes.

 

[RunningBum]

Great! I opened my Vanguard account this morning too. I haven't funded it yet, because I'm also selling some of the Primecap holding that I plan to fund the giving account with, and I want to make sure the highest gain shares go to the DAF. I put my sale in for the other shares (SpecID) but it hasn't completed yet. Once it does, all that will remain is those shares I want to donate.

 

[mpeirce]

Heh. Me too.

It was very easy. To fund it I'm moving some $7 AAPL over to it from eTrade and that'll take a few days - or so I'm told.

And I get to feel like a Rockefeller since I now have the "John D. Doe and Jane D. Doe Foundation". We'll see how that sounds read out loud on PBS ;-)

 

[JoeWras]

Heh. Me too.

It was very easy. To fund it I'm moving some $7 AAPL over to it from eTrade and that'll take a few days - or so I'm told.

And I get to feel like a Rockefeller since I now have the "John D. Doe and Jane D. Doe Foundation". We'll see how that sounds read out loud on PBS ;-)

I know you have the smiley, but do be careful! When your name is announced on PBS as part of a "foundation," some friends from childhood may suddenly remember you. Careful!

The good news is that the DAFs allow all kinds of ways to inform the recipient. Anonymous, name only, name + address, "do not publish", etc. Make sure to pick the one you want. And perhaps that means hearing your fund name announced on PBS!

 

[mpeirce]

Just a joke.

The actual name is non-descript and we plan on anonymous donations from this anyway.

Good advice though.

 

[JoeWras]

Just a joke.

The actual name is non-descript and we plan on anonymous donations from this anyway.

Good advice though.

I wish I had named ours more non-descript.

Hmmm, gotta look into a name change...

 

[Lagniappe]

Thanks for bringing this up, OP. I needed the reminder.

I transferred shares of a mutual fund to my Fidelity DAF this morning. I chose to transfer a fund rather than sell and send cash to the DAF for convenience. Selling this one was going to be a nightmare, since I have owned it for almost 20 years and my basis was really tough to figure out. Went down to the Fidelity office, got a medallion guarantee and they overnighted the forms to Fidelity Charitable for me.

 

[audreyh1]

Thanks for bringing this up, OP. I needed the reminder.

I transferred shares of a mutual fund to my Fidelity DAF this morning. I chose to transfer a fund rather than sell and send cash to the DAF for convenience. Selling this one was going to be a nightmare, since I have owned it for almost 20 years and my basis was really tough to figure out. Went down to the Fidelity office, got a medallion guarantee and they overnighted the forms to Fidelity Charitable for me.

Donating appreciated assets gets a bigger tax break than cash assuming you itemize. The gain from a sale never appears as income, yet you get to deduct the fair market value of the gifted shares.

 

[RunningBum]

Odd. I stepped through most of the contribution transaction yesterday, and *thought* I'd stopped short of submitting, because I remembered that the other transaction hadn't gone through. This morning, I see that my sale went through overnight so I logged into my giving account, and it was funded with the amount that I had planned to transfer. Even more odd, the shares are still in my VG account, and nothing shows pending. It looks like I could sell them right now. I'm going to guess that this will get resolved in the next 24 hours, otherwise I'll have to call or email.


I think we had at least one other person who funded to a VG giving account from their VG taxable account yesterday--do you see the money in your DAF but still see your funds in your taxable account?


I was going to do the exact transaction I started yesterday, so there's no real harm, but I'm a little disturbed that I committed to a transaction without realizing it. If I was 100% certain I'd be more disturbed, but since it was a new (to me) interface maybe I missed a notice. I had selected the shares to transfer in my account, and selected my DAF investment choice, but thought I hit cancel then.


Luckily this is an error in my favor, and if VG refuses to admit their error, then I guess I get to keep the funds in both places. Yeah, I could stay quiet and hope they don't notice but that's not right, and they'll probably catch it sooner or later, and with my luck they'd catch on Jan 2 and cancel the donation and wouldn't get it for 2017 taxes.

 

[RunningBum]

Donating appreciated assets gets a bigger tax break than cash assuming you itemize. The gain from a sale never appears as income, yet you get to deduct the fair market value of the gifted shares.

That aspect of the tax break is there whether you itemize or not, if your choices are to sell then donate vs. donate appreciated asset. You would have to report the sale whether you itemize or not and that would add taxable income, so donating the appreciated asset is always a tax advantage. The itemizing lets you deduct the donation itself, regardless of whether it's cash or an appreciated asset.

 

[Golden sunsets]

I've given the DAF concept a lot of thought since the Senate passed its bill, assuming that some iteration will finally pass and affect 2018 taxes. My thought is to donate the approximate amount that our giving budget would equal over the next five years. As our religious support is a good part of the total I first need to make sure that the entity is set up as a 501(c)(3). It also makes sense to donate appreciated Equities although we have no plans to ever sell equities or funds in our taxable accounts and assume that they would transfer to our heirs on a stepped up basis. We also plan to make our 2018 RE tax payment this year. Because we are in the 25% tax bracket this year I think that if we execute on this plan we will save$7,500-$8,000 in federal and state taxes this year. We would switch to taking the standard deduction next year for as long as the temporary rates are in force so that $7,500 is a permanent savings if I am looking at this correctly. When the fund is drained in 5 years, rinse and repeat.

Thanks for the good info and links to check out our current charities vis a vis 501 status.


Sent from my iPad using Early Retirement Forum

 

[JoeWras]

Odd. I stepped through most of the contribution transaction yesterday, and *thought* I'd stopped short of submitting, because I remembered that the other transaction hadn't gone through. This morning, I see that my sale went through overnight so I logged into my giving account, and it was funded with the amount that I had planned to transfer. Even more odd, the shares are still in my VG account, and nothing shows pending. It looks like I could sell them right now. I'm going to guess that this will get resolved in the next 24 hours, otherwise I'll have to call or email.


I think we had at least one other person who funded to a VG giving account from their VG taxable account yesterday--do you see the money in your DAF but still see your funds in your taxable account?


I was going to do the exact transaction I started yesterday, so there's no real harm, but I'm a little disturbed that I committed to a transaction without realizing it. If I was 100% certain I'd be more disturbed, but since it was a new (to me) interface maybe I missed a notice. I had selected the shares to transfer in my account, and selected my DAF investment choice, but thought I hit cancel then.


Luckily this is an error in my favor, and if VG refuses to admit their error, then I guess I get to keep the funds in both places. Yeah, I could stay quiet and hope they don't notice but that's not right, and they'll probably catch it sooner or later, and with my luck they'd catch on Jan 2 and cancel the donation and wouldn't get it for 2017 taxes.

This usually clears up over the settlement period (2 days or so). Watch it.

EDIT: actually, I'm wrong. That's weird. It is the other way usually. You see the funds go out of your brokerage, but not in the DAF until settlement occurs. Double watch it.

 

[flintnational]

I think we had at least one other person who funded to a VG giving account from their VG taxable account yesterday--do you see the money in your DAF but still see your funds in your taxable account?

We set up a Vanguard DAF yesterday. This morning the assets were gone from my regular Vanguard account. However they were not posted to Vanguard Charitable. There was an (i) information button at VC indicating assets were in the process of being transferred.