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Donor-Advised Funds – do you have one?

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

  • Avatar spotty_dog 
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    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

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    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.

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    Okay, cool. As someone who works with volunteer-run nonprofits, I just wanted to defend the idea that the groups were somehow shady or even lawbreaking for not giving you the backup documentation you wanted. I’m sure it’s a PITA to have so many $250+ donations to have to follow up on, and it definitely sounds like a DAF will be a big simplification for you. Good luck!

    #109927 Reply
    Liked by Hank, artemis
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 540
    Joined: 12/02/2016

    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).

     

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    That’s the major thing that’s attracting me to a DAF.  I just counted:  I donated to over 70 different charities last year!  And a lot of the donations were in the $50-$300 range.  If I could make those same donations via a DAF, my accountant would probably fall to his knees and weep for joy.  I’d still have a few donations I’d be making via credit card or wire transfer of funds, but going from 70 receipts to less than a dozen would be a huge logistical improvement.

    I like being generous, but come tax time it too often feels like “no good deed goes unpunished.”  Simpler is better!

    #109948 Reply
    Avatar FIREshrink 
    Participant
    Status: Physician
    Posts: 964
    Joined: 01/11/2017

    Happy Fido DAF customer for more than a decade.

    #109975 Reply
    Avatar adventure 
    Participant
    Status: Spouse
    Posts: 1154
    Joined: 10/24/2016

    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.

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    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.

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    So, perhaps we should do this sooner than I’d thought…

    Help me understand some logistics here – say your undergrad university calls (annually…) and you decide to give them $100. (501 c3 non-profit) Instead of giving them my Visa #, how would I give them the same $100 from a DAF?

    #110048 Reply
    Vagabond MD Vagabond MD 
    Participant
    Status: Physician
    Posts: 3351
    Joined: 01/21/2016

    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.

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    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.

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    So, perhaps we should do this sooner than I’d thought…

    Help me understand some logistics here – say your undergrad university calls (annually…) and you decide to give them $100. (501 c3 non-profit) Instead of giving them my Visa #, how would I give them the same $100 from a DAF?

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    First off, never answer the phone unless you know who is on the other side and that you want to talk to them. 😉

    Making the donation to your university is an online transaction that, once signed in, requires about one minute the first time that you do it and about 45 seconds thereafter.  At least that has been my experience with Fidelity.

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

    #110051 Reply
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 540
    Joined: 12/02/2016

    Help me understand some logistics here – say your undergrad university calls (annually…) and you decide to give them $100. (501 c3 non-profit) Instead of giving them my Visa #, how would I give them the same $100 from a DAF?

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    If your university is already in the DAF’s database, you just select it, enter the amount you want to donate, and then click the “donate” button.  If the charity is not in the database, you also have to supply some basic information to the DAF, who will then investigate to make sure the charity is legit.  Once they are convinced it is, they will add the charity to the database and send the gift.

    There are a few wrinkles with DAFs you need to be aware of:

    Once you send your money to the DAF, it belongs to the fund and not to you.  And technically, it’s the DAF decides who to give the money to, not you.  You’e just making recommendations.  With the big boys like Vanguard, Fidelity, and Schwab, this isn’t much of an issue; if the charity is registered with the IRS as a 501(c)3 it’s going to get the money.  But some DAFs are run by organizations that may have an ideological bias, and in those cases there have been instances of the DAF refusing to make a grant to an organization they feel goes against their mission statement.

    You can’t make grants to specific individuals (like a Go Fund Me campaign for an individual family, or a scholarship for a specific individual) via a DAF.  You can’t receive anything of value, either, which means you can’t use a DAF to pay for a ticket to a charity dinner or for an annual membership that offers donors a free gift (unless you waive the free gift and 100% of the money goes to the charity).

    For most of us, these restrictions are no big deal, but you need to be aware of them before you sign up for a DAF.  I do attend a couple of charity dinners and auctions, and I do donate to a few charities that offer a magazine subscription as part of their member benefits (and I want the magazine), but I figure I’ll just do those donations the old-fashioned way.  I’ll use the DAF for the food bank, the homeless, shelter, the humane society, etc.  I’ll still have a few individual receipts and transactions I’ll need to keep track of, but the lion’s share will be gone, and that will be a relief!

    #110066 Reply
    Avatar adventure 
    Participant
    Status: Spouse
    Posts: 1154
    Joined: 10/24/2016

    There are a few wrinkles with DAFs you need to be aware of:

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    First off, never answer the phone unless you know who is on the other side and that you want to talk to them. Making the donation to your university is an online transaction that, once signed in, requires about one minute the first time that you do it and about 45 seconds thereafter.  At least that has been my experience with Fidelity.

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    Thank you for the very helpful information and examples!!

    #110298 Reply
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 540
    Joined: 12/02/2016

    You’re welcome!

    I just remembered there’s one more restriction on the use of a donor-advised fund that we as physicians might trip over.  The money in a DAF cannot be used (per Federal law) to fulfill a “legally binding pledge.”  So if your hospital decides to build a new ER (for example) and wants the physicians on staff to commit to donating money over the next few years to help fund the project, depending on how that pledge is worded a DAF may not be able to fund it.  Ditto with endowing scholarships.  It all comes down to the specific wording used.  Sometimes the wording of a pledge can be changed so DAF money can be used, but  sometimes it can’t.

    Here’s an article that discusses the problem:  https://www.philanthropy.com/article/Opinion-Strings-on/232197

    And here’s Fidelity’s take on the subject: https://www.fidelitycharitable.org/articles/making-pledge-donor-advised-fund.shtml

    #110307 Reply
    nachos31 nachos31 
    Moderator
    Status: Physician
    Posts: 425
    Joined: 01/12/2016

    You can’t make grants to specific individuals (like a Go Fund Me campaign for an individual family, or a scholarship for a specific individual) via a DAF.

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    PoF brought this up during some down time at the WCI conf that he was able to donate to someone specifically via their charitable group for a service trip or something similar. He just donated to the group (which was a legit charity) and made note to the group that the money was for that person. I don’t remember the details but perhaps PoF could chime in and/or confirm success.

    #110309 Reply
    q-school q-school 
    Participant
    Status: Physician
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    Joined: 05/07/2017
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    I do not.  I like to give cold hard check or credit card, because the cheapie side of me likes to get points.

    I still think of the stocks as appreciating assets and the cheapie side of me likes to keep the growth potential for myself.

    I know I’m stupid and not tax efficient.

     

     

    #110311 Reply
    Liked by Kamban
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 540
    Joined: 12/02/2016

    I do not.  I like to give cold hard check or credit card, because the cheapie side of me likes to get points.

    I still think of the stocks as appreciating assets and the cheapie side of me likes to keep the growth potential for myself.

    I know I’m stupid and not tax efficient.

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    You’re not stupid, you just wish to donate a different way.  I like points, too, which is why I set up so many credit card donations.  But fear of the IRS is beginning to take priority for me.  I just don’t want an audit to be a nightmare.

    For what it’s worth, if I set up a DAF I plan to fund it using cash (because it’s simpler), not appreciated securities.

    #110317 Reply
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 540
    Joined: 12/02/2016

    You can’t make grants to specific individuals (like a Go Fund Me campaign for an individual family, or a scholarship for a specific individual) via a DAF.

    Click to expand…

    PoF brought this up during some down time at the WCI conf that he was able to donate to someone specifically via their charitable group for a service trip or something similar. He just donated to the group (which was a legit charity) and made note to the group that the money was for that person. I don’t remember the details but perhaps PoF could chime in and/or confirm success.

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    I think the key is “he donated to the group.”  Technically the charity could have used the money for anything, so using a DAF was OK.

    #110318 Reply
    PhysicianOnFIRE PhysicianOnFIRE 
    Moderator
    Status: Physician
    Posts: 1534
    Joined: 01/08/2016

    You can’t make grants to specific individuals (like a Go Fund Me campaign for an individual family, or a scholarship for a specific individual) via a DAF.

    Click to expand…

    PoF brought this up during some down time at the WCI conf that he was able to donate to someone specifically via their charitable group for a service trip or something similar. He just donated to the group (which was a legit charity) and made note to the group that the money was for that person. I don’t remember the details but perhaps PoF could chime in and/or confirm success.

    Click to expand…

    You can donate “in honor of” an individual or enter free text stating that your donated dollars are to support the fundraising of an individual. Note that the individual is someone doing charitable work, not receiving the charitable dollars.

    A couple recent examples were someone playing 100 holes of golf in Wisconsin to raise money for a charity that fights cancer. I donated from Fidelity DAF to the charity in support of my friend whose role is to collect $5,000 in donations and golf a lot.

    Another was a gal going to Maldova to help out in an orphanage. I made the donation to the charitable organization (Boaz project) stating that the money was to support the mission trip of our friend.

    In both cases, grants were made and assigned to the individuals by the charitable organization. Note how that’s different than donating where the money is used to help one individual. The specified individual is not on the collecting or receiving end, but is doing a good deed of some kind.

    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.

    #110321 Reply
    Liked by artemis
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 540
    Joined: 12/02/2016

    Bumping this to ask:  for those of you who bank at an institution other than the one which holds your DAF, how easy have you found it to move cash from your bank to the DAF?  I can move funds between my Vanguard money market account and my Wells Fargo checking account with a mouse click; it would be great if I could move cash from at least my Wells Fargo checking account to the DAF as easily (as I’m looking at using my tax refund to jump-start the DAF, and it will be auto-deposited into my Wells Fargo checking account).  I don’t mind some paperwork when moving securities, but I do mind it when moving cash, and the ease of cash transfers may be the dealbreaker when it comes to choosing between Fido and Schwab.

    #111069 Reply
    Avatar BurnedoutDoc 
    Participant
    Status: Physician
    Posts: 39
    Joined: 11/21/2016

    Some other points about DAFs:

    If you invest in the market, the money will grow.  More money for the charity and you look extra good!  Everyone wins. (of course this could go the other direction)

    Great place to put appreciated stocks.

    If you are close to the new standard deduction on the new tax law, you can alternate years contributing to charity.  One year contribute $20,000, the next year $0. Take the deduction the $20,000 year and standard deduction the next year but have $10,000 per year to give away.

    To the person wondering if their college in on the DAF list, I would be absolutely shocked if it was not.  Vanguard lets you put a donation to the attention of a certain person, plus category you want it donated towards, etc.

    #111078 Reply

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