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Setting up a Donor Advised Fund, is it worth the extra complexity?

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  • Setting up a Donor Advised Fund, is it worth the extra complexity?

    Each year to celebrate the time of Thanksgiving, one of the ways we give thanks for our good fortune is by making the majority of our charitable donations for the year. I just finished making out checks for 4 and 5 figures to a long list of local, national and international charities. We donate to the homeless, the homebound elderly, to food support, to the arts, to education, to international causes and to other charities.

    Is it a hassle to do this from a Donor Advised Fund? A DAF sounds almost like having a mini family foundation where you have investment accounts that grow and can be donated to charitable causes when the time is right.

    Does anyone have experience with the various fund companies that set up DAFs? We have a lot of assets invested with Vanguard. How has your experience been with a Vanguard DAF? Is it worth the effort to set up the account and to donate through the fund company as opposed to direct donations?

  • #2
    I set one up a Vanguard and it was easy. I have not disbursed any money yet.

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    • #3
      We use Fidelity.
      It is awesomely easy, mostly because we have a large aftertax account at Fidelity.
      They identify the holdings with the largest capital gains.
      We donate those to the DAF, and take the full write-off.
      These are usually legacy single stocks/holdings from our pre-DIY indexing days. Once in the DAF, we usually liquidate and put in SP500.
      We then "recommend" a grant to the DAF - it is approved 2-3 days later, and the check goes out to the charity.
      Once DAF setup, you can do everything from the app if you chose - it's that easy.
      The only hassle is you cannot quickly/easily do the "GoFundMe" and other online fundraising stuff that friends/family will hit you up with on social media. We get the charity name and number, and then make the recommendation to the Fidelity DAF portal.

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      • #4
        I set one up earlier this year at Fidelity where most of my various accounts are kept. I batched several years worth of contributions so it will actually be deductable as last year I didn't exceed the personal deduction for MFJ. The ease of use is as easy as described in redsox19 post. I highly recommend using a DAF for your charitable giving.

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        • #5
          Also have one set up with Fidelity. Was easy. Haven't made any distributions yet. Letting it accumulate for a few more years.

          Can't say if Vanguard's is any better. Didn't look into them.

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          • #6
            Not a hassle at all. In many ways, it is easier than writing checks and keeping track of donations.

            I have had a Fidelity DAF for at least ten years, and it was one of the best financial decisions I have ever made. Having it has pushed me to donate more, too, which is probably a good thing!

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            • #7
              Originally posted by White.Beard.Doc View Post
              Each year to celebrate the time of Thanksgiving, one of the ways we give thanks for our good fortune is by making the majority of our charitable donations for the year. I just finished making out checks for 4 and 5 figures to a long list of local, national and international charities. We donate to the homeless, the homebound elderly, to food support, to the arts, to education, to international causes and to other charities.

              Is it a hassle to do this from a Donor Advised Fund? A DAF sounds almost like having a mini family foundation where you have investment accounts that grow and can be donated to charitable causes when the time is right.

              Does anyone have experience with the various fund companies that set up DAFs? We have a lot of assets invested with Vanguard. How has your experience been with a Vanguard DAF? Is it worth the effort to set up the account and to donate through the fund company as opposed to direct donations?
              That’s very generous however when i think of these large international charities I just can’t help but feel that your money will be going to some administrator’s salary or wasted on something not directly charitably related.

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              • #8
                It's not hard.

                I'd say the hassle of set up is about the same as a 529 plan, maybe a little less.

                And once set up, it is even easier to use than an 529.

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                • #9
                  I’ve used Schwab. Mostly because I had a bunch of legacy equities with significant gains. Easy to set up. Easy to use to fund charities. Easy to bunch deductions. And easy to use contributions with low cost basis. It’s a win, win, win.

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                  • #10
                    Thank you everyone for the responses. It sounds like it is unanimous that the DAF is a hassle free way to donate.

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                    • #11
                      Originally posted by fatlittlepig View Post

                      That’s very generous however when i think of these large international charities I just can’t help but feel that your money will be going to some administrator’s salary or wasted on something not directly charitably related.
                      FLP, we use "Charity Watch" https://www.charitywatch.org/ to vet all of the charities that we support. They vet international charities along with the domestic ones. We also look at "Give Well" https://www.givewell.org/. They assess the effectiveness and the return on each dollar donated in terms of impact. While we have plenty of good charities that we like to support in the USA, the need of so many in other parts of the world is often greater in terms of basic things like clean water to drink. (Well, as I think about it, we do have Flint Michigan that had their serious water problem due to local government ineptitude.)

                      Some of the international charities we support include the "Against Malaria Foundation" which distributes mosquito nets and has been vetted in the past to save more lives for each dollar donated than any other charity. We also support "Charity: Water" and "Doctors without Borders". We categorize the charities we support into local organizations, national organizations, and international.

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                      • #12
                        The DAFs @TDA and Fido are both great, would expect VG's to be, also. One of the best bene's is that you can donate appreciated stock when you're rebalancing and avoid LTCG taxes.
                        Financial planning, investment management and CPA services for medical professionals | 270-247-6087

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                        • #13
                          Using a DAF is much, MUCH easier than writing lots of checks and having to keep track of lots of tax receipts! You only have one receipt to keep track of: the one showing the donation to the DAF. The only downside with Vanguard's DAF is that the minimum amount needed to open the fund is $25,000 and the minimum grant to a charity is $500 - but if you're writing checks for thousands or tens of thousands of dollars, that may not be an issue for you. You can always donate more than one years' worth of donations, too, if you need to in order to meet that $25,000 new account minimum. And transferring appreciated shares from your Vanguard taxable accounts over to the DAF would be super-easy; it would just involve a few mouse-clicks online.

                          But if you'd like a DAF with a lower minimum investment to open an account, and a lower grant amount, look at Fidelity and Schwab. Both only require $5,000 to open the DAF, and allow grants to charities as low as $50. I have a Schwab DAF and my taxable investments are with Vanguard; in order to transfer shares I have to fill out a form and print out a copy of my Vanguard statement proving I have adequate funds for the transfer, and mail everything to Schwab. It can take up to three weeks for the transfer to go through if they are busy, but it's a pretty easy process.

                          Edited to add: Be aware that you can't use a DAF to buy tickets to charity events like dinners or auctions, or if you will receive goodies of real material value in thanks for the donation (such as one of those pledges to PBS that gets you a "free" DVD for XXX dollars donated), or to fulfill a "legally binding pledge." (The best example of the latter is probably a pledge made to a university to fund an endowed scholarship over a period of several years, or a pledge to fund a capital improvement program at your hospital and clinic which will be paid over several years.) But most people aren't making too many of those sorts of donations, so it's usually not a big issue.

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                          • White.Beard.Doc
                            White.Beard.Doc commented
                            Editing a comment
                            Thanks Artemis, that is helpful information. The Vanguard DAF should work for us starting with 2020 as our starting donation is typically $1000. And knowing that the DAF cannot be used to buy tables at the annual hospital gala is also helpful information.
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