Charity after FIRE

[kannon]

Morning.
We would like to set up contributions to our favorite charities to continue after we pass on. We have most of our investments (IRAs, investments) at Vanguard.
Has anyone set up a continuing charity contribution fund with Vanguard and if so, how best to do it.
Thanks

 

[38Chevy454]

Just a question, if this is after you have died, why not make the charity the beneficiary of your accounts and simply let them have it all at that time? I don't see why stretching 'it out does anything besides make it harder on your estate executor.

 

[JoeWras]

One solution is to use a Donor Advised Fund (DAF), such as Vanguard Charitable or Fidelity Charitable.

You can name the DAF as a beneficiary of your estate. Within the DAF, you can set up a legacy plan.

I can't speak for all DAFs, but Vanguard Charitable allows you a few options:
1) Name somebody to manage your DAF distributions
2) Set up an automatic distribution to named charities as a percentage of the holdings over years, like an endowment
3) Cash it all out at once per your charity list and percentages

You can even mix and match #1 and #2, so perhaps let your children manage a portion of your endowment as they like, but also retain your own plan.

The nice thing about this is it doesn't require you to update your will or trust. Just name the DAF and you can change the legacy plan anytime.

This does require confidence in the DAF, and confidence that laws won't change regarding donating to DAFs.

DW and I have no children. Some portion of our estate will go to relatives, and the majority to the DAF where we have set up a distribution plan. We change the plan from time to time as our charity preferences change.

Regarding #2, I think this is what you want. There are various rules at Vanguard Charitable. You have to donate 5% per year in aggregate. But in a good market, this could last a long, long time. Of course, DAFs do have yearly fees. I see this as paying for managing this quasi-endowment.

There are also a lot of rules as to what happens if the charities in your list go away. The percentages adjust among the remaining, and if you have none left, it goes to their general charity.

Please see more here: https://www.vanguardcharitable.org/giving-with-vc/how-it-works/legacy-planning

One unique aspect of a donor-advised fund (DAF) account is the ability to continue charitable giving beyond your lifetime. A giving legacy, laid out in a succession plan, is an effective way to ensure assets in your account continue to fulfill your giving goals after you pass.

 

[kannon]

this is for after we pass. I want to make things as easy as possible for my spouse and this would be one less item she needs to deal with. It's a children's cancer research center and we want to keep giving even after we pass.

 

[kannon]

One solution is to use a Donor Advised Fund (DAF), such as Vanguard Charitable or Fidelity Charitable.

You can name the DAF as a beneficiary of your estate. Within the DAF, you can set up a legacy plan.

I can't speak for all DAFs, but Vanguard Charitable allows you a few options:
1) Name somebody to manage your DAF distributions
2) Set up an automatic distribution to named charities as a percentage of the holdings
3) Cash it all out at once per your charity list and percentages

The nice thing about this is it doesn't require you to update your will or trust. Just name the DAF and you can change the legacy plan anytime.

This does require confidence in the DAF, and confidence that laws won't change regarding donating to DAFs.

So would this mean setting up a DAF with Vanguard now? How do we ensure ability to properly keep it funded? Was thinking using our Wellesley account and use it's account payback to keep the charity fund going.

 

[JoeWras]

So would this mean setting up a DAF with Vanguard now? How do we ensure ability to properly keep it funded? Was thinking using our Wellesley account and use it's account payback to keep the charity fund going.

First: if the DAF minimums of Vanguard Charitable (technically different from Vanguard Corp) are troublesome, look at Fidelity Charitable. Their minimums are much lower.

Second: I know it works if you already have an account. I can log into my account and see my succession plan. Their forms do mention the possibility of creating a new account at the time V.C. gets a beneficiary gift. However, the details on that are hazy to me and you should probably call to see how this works.

As a matter of fact, you bring up a good point about keeping it funded. For the most part, a DAF will stay funded as long as you grant $500 every 30 months. This should not be too difficult. If you fail at this, they start using the succession plan, which could deplete the funds. Your point brings up a thought, however. What if DW and I both get cognitive difficulties and the plan goes into "abandonment." It is a worst case scenario, but one I need to ponder and probably discuss with V.C. myself.

Before getting into any DAF, read all their policies and guidelines. It is a bit long, but a necessary read. In the case of V.C., most scenarios are spelled out, although outlier cases are a bit hazy. Policies here: https://www.vanguardcharitable.org/company-policies/policies-and-guidelines

 

[OldShooter]

this is for after we pass. I want to make things as easy as possible for my spouse and this would be one less item she needs to deal with. It's a children's cancer research center and we want to keep giving even after we pass.

If you're just talking about one charity, I'd suggest that you talk to them about simply donating your funds with the stipulation that they are to go into their endowment fund or that (if possible) they establish a separate endowment fund for you. For the two or three nonprofits I've been involved with, that kind of request would probably be handled easily. Then you'd have no need involve or to pay fees to a third party.

We have done something similar with a local community foundation. We have a separate named fund that we donate to whenever it gets low and that will get six figures when we're gone. The purpose of the fund is written and agreed-on and they do a good job of using the money in the ways we want. We donate via QCDs, so the fund is explicitly identified as not being a DAF. When we're gone, the bequest will be funded with tIRA money, so that money will never be taxed.

On a related point, our fund is also explicitly identified as not being an endowment. If there are current needs that suit our criteria, that's enough. It's not like next year's needs are somehow more important than current needs. When our money is gone, it's gone. Hopefully having done some good along the way.

 

[JoeWras]

If you're just talking about one charity, I'd suggest that you talk to them about simply donating your funds with the stipulation that they are to go into their endowment fund or that (if possible) they establish a separate endowment fund for you. For the two or three nonprofits I've been involved with, that kind of request would probably be handled easily. Then you'd have no need involve or to pay fees to a third party.

Or even a few charities. Just name the endowment fund of that charity in your will.

I think OldShooter has a good point here because it simplifies your estate, while still meaningfully giving over time -- it is just the endowment that handles the "over time" part.

As someone who has been (and currently is) been on boards of non-profits, I can say a one time large gift is usually used in a non-optimal way by the charity. We get grants from endowments, and they force us to re-think every year. It avoids a lot of knee-jerk thinking and wasteful projects.

 

[Sunset]

Seems it would be a better benefit to OP to give the money, while they are alive. A tax deduction won't be much help once dead.

Of course I always think of the librarian at a University who died and left the University ~$4 million. He wanted it to enhance the library, instead the University spend most of it on a new Football Scoreboard. The dead librarian wasn't interested in Sports

 

[JoeWras]

Seems it would be a better benefit to OP to give the money, while they are alive. A tax deduction won't be much help once dead.

Of course I always think of the librarian at a University who died and left the University ~$4 million. He wanted it to enhance the library, instead the University spend most of it on a new Football Scoreboard. The dead librarian wasn't interested in Sports

Well, you just gave a good example of a knee-jerk thinking and a wasteful use of a large one time donation!

Maybe OP does both. We do both. We give generously every year, but there's a good chance some will be left over, hence the plan.