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Donor-Advised Funds – do you have one?

Home Personal Finance and Budgeting Donor-Advised Funds – do you have one?

  • Avatar artemis 
    Participant
    Status: Physician
    Posts: 440
    Joined: 12/02/2016

    It’s tax season again, which means for me it’s time to organize the giant mound of receipts I have from charities (many for rather small donations). A couple of charities I donate to on a regular basis still haven’t sent me their receipts for my 2017 donations, even though it’s mid-March, which means I won’t be able to claim those deductions this year. And if the IRS comes poking around because they don’t believe my charitable deduction figure (as they did several years ago) I’m gong to have to go through a lot of credit card statements and maybe also get copies of cancelled checks from the bank. I’m seriously beginning to wonder if opening a donor-advised fund would be a good idea in order to simplify things for next year and beyond. I wouldn’t be able to use it for everything, but if I could use it for the majority of my donations it would certainly cut down appreciably on the paperwork at tax time.

    So, do any of you have a DAF? Who do you use for yours, and what do you like and dislike about it? Can you set up grants to occur automatically on a set schedule, or do you have to manually initiate each grant? I know Vanguard Charitable allows automatically recurring grants, but their minimum grant size of $500 is very large – I’d have to cut down on the number of charities I donate to if I went with Vanguard. I know Fidelity and Schwab allow grants as small as $50, but I don’t know if they allow automatically recurring grants.

    I like the ease of setting up automatic monthly donations on my credit cards, but not the tax-season paperwork headaches. The idea of making a single large donation to a DAF, with only one donation letter and one transaction to keep track of come tax time, sounds very appealing right now, but will I be setting myself up for different headaches down the road?

    Help me make the right decision here!

    #109819 Reply
    Vagabond MD Vagabond MD 
    Participant
    Status: Physician
    Posts: 3018
    Joined: 01/21/2016

    I use Fidelity’s DAF and have since 2004. I am happy with the interface, service and ease of use. The investment choices have improved over the years, and the fees have come down. My largest taxable account is with Fidelity, so it has been easy to make the contributions and keep track of cost basis and such.

    "Wealth is the slave of the wise man and the master of the fool.” -Seneca the Younger

    #109826 Reply
    Liked by jz
    Avatar jz 
    Participant
    Status: Physician
    Posts: 611
    Joined: 01/09/2016

    Looks like you’ve researched them all.  Yes, Schwab allows recurring grants. I use Vanguard charitable for larger donations and Schwab Charitable for smaller ones.

    #109830 Reply
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 440
    Joined: 12/02/2016

    I use Fidelity’s DAF and have since 2004. I am happy with the interface, service and ease of use.

    Click to expand…

    Can you set up recurring grants on Fidelity’s platform?

    #109836 Reply
    Avatar ITEngineer 
    Participant
    Status: Other Professional
    Posts: 292
    Joined: 05/09/2017

    I have one. It definitely simplifies things come tax time since we make one large contribution annually to it.

    Why aren’t your charities sending you notice of your contributions in a timely fashion (assuming they are over the minimum amount required by law to send you paperwork, which I believe is $250)? I would be concerned about the quality of the charity if I was not receiving my tax documents by a certain reasonable date.

    #109841 Reply
    Vagabond MD Vagabond MD 
    Participant
    Status: Physician
    Posts: 3018
    Joined: 01/21/2016

    I use Fidelity’s DAF and have since 2004. I am happy with the interface, service and ease of use.

    Click to expand…

    Can you set up recurring grants on Fidelity’s platform?

    Click to expand…

    I have not used it, but I just checked and you can indeed set up recurring grants.

    "Wealth is the slave of the wise man and the master of the fool.” -Seneca the Younger

    #109845 Reply
    Rogue Dad, M.D. Rogue Dad, M.D. 
    Participant
    Status: Physician
    Posts: 856
    Joined: 03/07/2016

    We opened one last year at Fidelity, transferring assets from Betterment.

    Fidelity royally messed it up and despite 5 weeks of time, got the transfer completed the final business day of 2017.

    Why We’re Not Donating to Charity in 2018

    Now we have it I need to get around to setting up the same recurring donations we used to have.  Goal is not to use the balance all up, so will probably need to make periodic contributions to the DAF.  I can still itemize for now thanks to my mortgage interest, but once I am below the itemized threshold will probably lump DAF contributions every other year or something.

    We generally made a bunch of small recurring donations to different organizations, or one-off donations when asked.  So a DAF will simplify things considerably for us.  The only thing we will need receipts for going forward is the drop off to the charity/thrift store kind of stuff.

    http://www.RogueDadMD.com

    An alt-brown look at medicine, money, faith, and family

    #109847 Reply
    Avatar Bmac 
    Participant
    Status: Physician
    Posts: 280
    Joined: 10/21/2017

    We opened one up at Schwab at the end of 2017. Had existing brokerage account there with some legacy equities with very small cost basis, so it made the most sense to use these to fund the DAF. Set up was very simple. Just did our first grant and that was also very easy.

    #109849 Reply
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 440
    Joined: 12/02/2016

    Why aren’t your charities sending you notice of your contributions in a timely fashion (assuming they are over the minimum amount required by law to send you paperwork, which I believe is $250)? I would be concerned about the quality of the charity if I was not receiving my tax documents by a certain reasonable date.

    Click to expand…

    Beats me.  The charities in question are 4-star rated by Charity Navigator; they just seem to be slow in getting their paperwork done.  But if I donate to them via a DAF, that’s the fund’s problem to deal with, not mine.

    I’d still be contributing to a few organizations by credit card (mostly to keep the cards active), but having a DAF would cut the paperwork by at least 75%.  I’m thinking that if I get a decent tax refund this year (which I am expecting), I could use that to set the fund up and then start switching over my donations to the DAF.  It would be easy enough to top off the DAF at regular intervals to keep it healthy and growing (especially once the credit card payments shrink!).

    Of course, first I have to decide between Schwab and Fidelity…  Decisions, decisions!

    #109851 Reply
    Avatar ITEngineer 
    Participant
    Status: Other Professional
    Posts: 292
    Joined: 05/09/2017

      It would be easy enough to top off the DAF at regular intervals to keep it healthy and growing (especially once the credit card payments shrink!).

    Click to expand…

    Pardon me for stepping out of line, but if you have credit card debt, I would encourage you to not make donations to charity until you clean up that debt. Maybe I’m misreading this.

    #109853 Reply
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 440
    Joined: 12/02/2016

      It would be easy enough to top off the DAF at regular intervals to keep it healthy and growing (especially once the credit card payments shrink!).

    Click to expand…

    Pardon me for stepping out of line, but if you have credit card debt, I would encourage you to not make donations to charity until you clean up that debt. Maybe I’m misreading this.

    Click to expand…

    You are misreading it.  My cards are paid off in full every month without exception.  But money that’s being used to pay off a credit card balance which is high due to recurring charitable donations being billed to the card is money that can’t be sent to the DAF.  I’ll still be spending the same amount of money every month, just directing it to a different place.  It’s just making the initial switch that is intimidating.  I don’t want to cancel the recurring credit card charges until the DAF is reasonably funded (which is where my tax refund would come in handy).

    #109857 Reply
    Liked by ITEngineer
    Avatar spotty_dog 
    Participant
    Status: Spouse
    Posts: 74
    Joined: 01/08/2016

    Just to be clear, it’s your responsibility as the donor to request written acknowledgement of the gift, assuming the gift is big enough to require that acknowledgement as part of your substantiation — and your responsibility to make sure you get it on time. Because if you don’t get it on time, you not only can’t claim it this year, you can’t claim it ever, because the acknowledgement has to be contemporaneous (defined as, received before you file the return for the tax year when you made the donation.) https://www.irs.gov/pub/irs-pdf/p1771.pdf

    #109859 Reply
    Liked by childay
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 440
    Joined: 12/02/2016
    Earnest refinancing bonus

    Just to be clear, it’s your responsibility as the donor to request written acknowledgement of the gift, assuming the gift is big enough to require that acknowledgement as part of your substantiation — and your responsibility to make sure you get it on time. Because if you don’t get it on time, you not only can’t claim it this year, you can’t claim it ever, because the acknowledgement has to be contemporaneous (defined as, received before you file the return for the tax year when you made the donation.) https://www.irs.gov/pub/irs-pdf/p1771.pdf

    Click to expand…

    I’m well aware of that, but I do not have the time right now to be chasing down the missing receipts, and my CPA understandably wants adequate time to process my tax paperwork, so I’ve already turned my tax forms into him.   Those donations therefore simply won’t be claimed on my tax return, which is irritating.  That’s one reason I’m strongly considering switching over to a DAF for most of my giving;  it will drastically reduce the number of receipts I need to keep track of.

    #109862 Reply
    Avatar Army MD Spouse 
    Participant
    Status: Spouse
    Posts: 4
    Joined: 03/09/2018

    We set up a DAF at Fidelity last month to simplify things and to dump a lump sum every-other year thanks to the new tax code. I too am sick of waiting for documentation each year. Luckily ours all came by the end of February this year.

    We also opened up a Fidelity Visa Signature Card. We’ll slowly transfer our regular monthly spending there. 2% rewards back into the DAF (you can also tie it to another Fidelity brokerage account) and no annual fee.

    #109884 Reply
    Liked by adventure, artemis
    PhysicianOnFIRE PhysicianOnFIRE 
    Moderator
    Status: Physician
    Posts: 1488
    Joined: 01/08/2016

    One of the under-appreciated aspects of the DAF is the simplification of tracking receipts. You can make one big donation, requiring one receipt, reported on one year’s 1040, and donate from that lump sum hundreds of times without keeping track of anything (although the DAF will keep track for you).

    I recommend Fidelity. I’ll probably be donating the balance of my Vanguard DAF to the Fidelity DAF. No sense in having two, and I haven’t found a good reason to keep Vanguard’s. The one minor benefit is the ease of donating appreciated Vanguard mutual fund shares, but I don’t think it’s terribly complicated to to donate Vanguard shares to Fidelity, either.

    I haven’t used Schwab, so I can’t compare to Fidelity. I know the fees and minimums are nearly identical.

    40-something anesthesiologist and personal finance blogger @ https://physicianonfire.com [Part of the WCI Network] Find me on Twitter: @physicianonfire

    FIRE. Financial Independence. Retire Early.

    #109915 Reply
    Liked by hatton1

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