Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Donor advised funds
Old 07-26-2017, 04:32 PM   #1
Recycles dryer sheets
 
Join Date: Apr 2016
Posts: 245
Donor advised funds

Anyone use these? I am still working, and in a high tax bracket. Seems like a pretty good deal -- I contribute appreciated stock, avoid capital gains tax, get the charitable deduction in year one, and then make charitable contributions, which I would make anyway, over X years in the future. Costs 60 bps at Fido. Schwab has similar. Wonder why I never did this in the past.
__________________

medved is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-26-2017, 04:41 PM   #2
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 2,639
Because you didn't know about it? That was the case for me.

The DAF becomes especially useful when one no longer is able to Itemize Deductions (Schedule A) every year such as when house is paid off or W2 income stops.

I now bunch deductions into every other year and further fund the DAF in these years. I can then request that the funds be dispensed whenever so that I don't loose the charitable deduction in the years when I don't file the Schedule A.

I went with Fido because their minimum grant request was only $50.

-gauss
__________________

gauss is offline   Reply With Quote
Old 07-26-2017, 04:56 PM   #3
Moderator
braumeister's Avatar
 
Join Date: Feb 2010
Location: Flyover country
Posts: 14,143
We opened a FIDO DAF in 2013 and we love it. Simplifies so much. I also like the nice gains the account has made since we opened it, further magnifying our ability to donate. I would recommend it to almost anyone.
__________________
I thought growing old would take longer.
braumeister is offline   Reply With Quote
Old 07-26-2017, 05:07 PM   #4
Thinks s/he gets paid by the post
RockyMtn's Avatar
 
Join Date: Jul 2009
Location: North Scottsdale
Posts: 1,396
I have had one at Schwab for about six years. Good for managing taxable income and bunching deductions. Some years I donate others I don't. Donating the appreciated equities is another bonus.
__________________
FIRE'D in July 2009 at 51...Never look back!
RockyMtn is offline   Reply With Quote
Old 07-26-2017, 05:51 PM   #5
Dryer sheet wannabe
 
Join Date: Dec 2016
Posts: 19
Quote:
Originally Posted by RockyMtn View Post
I have had one at Schwab for about six years. Good for managing taxable income and bunching deductions. Some years I donate others I don't. Donating the appreciated equities is another bonus.


+1
EQMAN is offline   Reply With Quote
Old 07-26-2017, 06:26 PM   #6
Thinks s/he gets paid by the post
 
Join Date: May 2014
Posts: 4,417
Greatest thing since sliced bread. I opened one to shelter a signing bonus when I started at my last employer.

My favorite feature is that you can donate anonymously. Make a generous contribution to a charity and send a check or put it on your credit card and they WILL track you down and hound you forever. You can tell Fidelity to send the check and state that the donor wishes to remain anonymous. Must drive them crazy!
athena53 is online now   Reply With Quote
Old 07-26-2017, 06:49 PM   #7
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 2,422
before FIRE I funded the fido doner advised fund [DAF]. In those days my state and local taxes exceeded my standard deduction, so all the gifts were tax deductible. Now I would have to bunch up a lot of stuff to get to the level of itemizing. But I can give from the DAF and let it grow..
bingybear is offline   Reply With Quote
Old 07-26-2017, 06:53 PM   #8
Moderator
braumeister's Avatar
 
Join Date: Feb 2010
Location: Flyover country
Posts: 14,143
Quote:
Originally Posted by athena53 View Post
My favorite feature is that you can donate anonymously.
Yes, I think this is my favorite feature as well. I've avoided getting on (or been dropped from) the begging lists of many charities by now and it's such a relief.
__________________
I thought growing old would take longer.
braumeister is offline   Reply With Quote
Old 07-27-2017, 12:48 AM   #9
Moderator
 
Join Date: May 2007
Location: Genève
Posts: 11,865
I started contributing to a Fidelity DAF 8 years ago. Our work income was pretty lumpy (due to stock options) and we used to contribute to the DAF only in good income years to get the maximum tax deduction. Now that we are retired, we have stopped contributing to the fund and use the balance to make charitable donations. I like to give anonymously.
FIREd is offline   Reply With Quote
Old 07-27-2017, 05:59 AM   #10
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 2,422
I use anonymously or semi anonymously (name, but not contact info) sometimes. However I like the tools to investigate potential charities. They (fido) provides access to external tools that allow one to check out the charity financials, org structure, and more.
bingybear is offline   Reply With Quote
Old 07-27-2017, 03:53 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 1,055
We have a VG DAF. We made donations in years when our tax rate spiked pre-retirement. Great for tax rate arbitrage but if you don't have tax rate differences better to use as pass-through. Anonymous donating is a real benefit! Keeps you off the lists which is critical in our small town.
jebmke is offline   Reply With Quote
Old 07-27-2017, 06:43 PM   #12
Recycles dryer sheets
 
Join Date: Nov 2011
Posts: 126
I've looked into doing a DAF but can't get past the idea that there is no additional tax benefit for the investment growth in the account after the point of your contribution. So, contribute securities in the amount of say, $10,000 now and get a $10,000 tax deduction. If the investment grows by 10%, to $11,000, there is no additional tax deduction. Instead, continue to hold the securities in my taxable account and donate the securities directly to the charity when I'm ready and now worth $11,000 and get a full tax deduction for $11,000 while still avoiding capital gains tax -- and eliminate the DAF fee as well. I get the other benefits that have been mentioned (bunching deductions, anonymity), but if you're routinely in a high tax bracket anyway, there seems to be tax and cost disadvantages to a DAF that should at least be considered.
__________________
FIREd 2012 at Age 49
523HRR is offline   Reply With Quote
Old 07-27-2017, 07:16 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Apr 2011
Posts: 2,738
Quote:
Originally Posted by 523HRR View Post
I've looked into doing a DAF but can't get past the idea that there is no additional tax benefit for the investment growth in the account after the point of your contribution. So, contribute securities in the amount of say, $10,000 now and get a $10,000 tax deduction. If the investment grows by 10%, to $11,000, there is no additional tax deduction. Instead, continue to hold the securities in my taxable account and donate the securities directly to the charity when I'm ready and now worth $11,000 and get a full tax deduction for $11,000 while still avoiding capital gains tax -- and eliminate the DAF fee as well. I get the other benefits that have been mentioned (bunching deductions, anonymity), but if you're routinely in a high tax bracket anyway, there seems to be tax and cost disadvantages to a DAF that should at least be considered.
Yes. I don't see how this helps tax-wise if you're still in high bracket when you donate in bunched deductions years.
gerntz is offline   Reply With Quote
Old 07-27-2017, 07:52 PM   #14
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 2,422
Quote:
Originally Posted by 523HRR View Post
I've looked into doing a DAF but can't get past the idea that there is no additional tax benefit for the investment growth in the account after the point of your contribution. So, contribute securities in the amount of say, $10,000 now and get a $10,000 tax deduction. If the investment grows by 10%, to $11,000, there is no additional tax deduction. Instead, continue to hold the securities in my taxable account and donate the securities directly to the charity when I'm ready and now worth $11,000 and get a full tax deduction for $11,000 while still avoiding capital gains tax -- and eliminate the DAF fee as well. I get the other benefits that have been mentioned (bunching deductions, anonymity), but if you're routinely in a high tax bracket anyway, there seems to be tax and cost disadvantages to a DAF that should at least be considered.
I donated to the DAF when I was working and in a high tax bracket and using appreciated securities. In those days my state and local income taxes exceeded the standard deduction. Thus I could write off my complete DAF contribution.

Now FIRE, I am somewhere in the 15% bracket with Q-Divy that are not taxed. Without donating other items I am not near itemizing. I use the DAF to fund my giving.
If you are not going to drop brackets after RE, then it may not make a lot of sense to use a DAF the way I am. The way I see it, I got the itemization when I was at high tax rates (while working). Now I can give away gifts using the money + growth of the DAF contributions. I took the itemization at a high tax rate and now donate it where I likely would not get much of a write off anyway.
Now if you are RE and in a much higher bracket, you may just have a bigger pot of $, are investing it differently, or have it distributed in account types differently.

There are many knobs to turn when planning FIRE and we each have to adjust our own.
bingybear is offline   Reply With Quote
Old 07-28-2017, 03:15 PM   #15
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 1,055
Quote:
Originally Posted by gerntz View Post
Yes. I don't see how this helps tax-wise if you're still in high bracket when you donate in bunched deductions years.
It doesn't. If you have no significant tax rate arbitrage you are better off donating only what you plan to donate for that year. Some use the DAF for this purpose -- pass through -- the main benefit is anonymity in this regard.

For me, I had a couple of spike years of my tax rate so it made sense to bunch. We also had a stock get bought out one year so rather than let them cash me out and trigger a gain I dumped it in the DAF.

I suppose it could also be used in lieu of setting up a foundation if you plan to blow out some big donations and don't know where to put them. Once we hit 70.5 I have to decide how we go about this - either DAF or foundation but I am not keen on the hassle of a foundation even though it might be cheaper.
__________________

jebmke is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Use of a donor-advised fund to donate to donors-choose euro Other topics 4 08-10-2016 08:09 PM
How are you handling your donor advised charitable fund? audreyh1 FIRE and Money 37 12-24-2014 11:11 AM
Is Donor-Advised Fund Good Idea? RetireAge50 FIRE and Money 28 06-13-2014 08:08 PM
Anyone Use Donor Advised Funds (DAF)? RockyMtn FIRE and Money 11 09-19-2013 06:51 PM
Donor-advised funds Nords FIRE and Money 30 12-22-2007 11:11 PM

» Quick Links

 
All times are GMT -6. The time now is 08:16 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.
×