<p>H an I are flirting with the idea of a Donor Advised Fund (perhaps with Fidelity) for charitable giving. We like that it has the option of letting you send an electronic gift certificate to give to others, so they can donate a set amount from a charity they choose, that the annual charge is 60 basis points (0.6 of 1% of the assets, or $100–whichever is less), and that the minimum “grant” is only $50 and minimum balance is $5000.</p>
<p>Just wondering if anyone has any experience or anything to say about these funds. We do make some charity donations every year and are thinking this is one way of donating appreciated assets that would have long term capital gain and getting a tax deduction without paying for the appreciation. </p>
<p>Would love anyone’s experiences and feedback as we continue to explore this option.</p>
<p>Hi Himom. I work with Hawaii Community Foundation, which also helps people set up DAFs (among other giving options). Of course, HCF is limited (I believe) to Hawaii-based/related charities, so if you want a broader reach, they’re not the way to go. They DO provide lots of wonderful scholarships to Hawaii kids, so you’ve probably heard of them from that angle. (Also, I’ve not heard of that gift certificate thing, sounds great.) You might check out their website (you can google the name and it should be the first hit), under “ways to give” there is a section on DAFs, just for more info.</p>
<p>I think DAFs are a great idea, that too few people know about. Can’t think of anything bad to say about them. They are similar to private foundations but not so expensive to set up and manage, so within the range of many more donors. I didn’t realize that Fidelity offers them now; I like Fidelity for their general investment options.</p>
<p>Yes, donating appreciated assets is a great strategy for avoiding the capital gains tax. Just be sure you have a good tax advisor, because there are some little twists and turns that can catch you by surprise. I’d run anything past an experienced, smart CPA before making a charitable gift. You may need appraisals, there are limitations that apply to gifts of artwork for example (may not be fully deductible at FMV depending on the charity’s use of them), and other things.</p>
<p>I agree that Fidelity Charitable is a pretty good deal, but want to point out that, in addition to the annual administrative fee of 60 basis points (and considerably less than that if you contribute more), you are also going to be charged the regular fees for the Fidelity mutual funds in which your DAF invests, which could add another 100+ basis points. From Fidelity’s point of view, they are providing a service to their clients, and encouraging charity, sure, but they are also driving additional assets into their investment vehicles.</p>
<p>Nevertheless, their administrative fee is rock-bottom cheap, and they are very flexible and client-oriented. They are being very aggressive about marketing themselves, and probably making a lot of community foundations – like Sweetbeet’s employer – very, very nervous. The community foundations tend to charge a lot more to administer DAFs, and often have lots of rules about how much and how you can make grants. (No electronic gift certificates, there, to be sure.) What the community foundations have that Fidelity Charitable really lacks is a bunch of professional philanthropy staff who know a lot about their community, and its needs, and the potential grant recipients out there. Fidelity Charitable has some of tthat, but not as much.</p>
<p>Actually, I have been the beneficiary of Hawaii Community Foundation–got college scholarships from some of their funds and also some grants to the non-profit I run. </p>
<p>H and I attended a presentation by Fidelity Charitable in HI last night. It was very interesting. They are 2nd largest private foundation behind United Way, which surprised me. They allow grants as low as $50 and seem the most flexible among the major brokerages. I believe they may be the only ones that offer “gift of giving” gift certificates, which is attractive to me. The nice thing is that you can decide how public or anonymous you want your donation–just the name of your Donor Advised Fund, NO name, and in any case NO address or contact info (unless you want to provide that). I really dislike getting tons of address labels and other solicitations (H is deluged by them).</p>
<p>I agree that you need to pay the fee–the higher of $100/year or 60 basis points PLUS whatever investment fee for investments–as low as 7 basis points for index funds with Fidelity. It can be an interesting tax strategy to consider, especially if income may have a few bumps along the way.</p>
<p>I set up a charitable gift account with Schwab and am very happy with the process. It’s especially useful if you have variable income and would like a large tax deduction one year, but perhaps no deductions in other years. We transferred appreciated stock from another account at Schwab, which minimized the paperwork.</p>
<p>The gifting is made easy, as most charities are in the database. You only have to select from a drop down menu to request the donation and they send off the check with a letter. The fund generates enough income every year that I haven’t tapped the principle, and I’ve ended up giving much more than in pre-charitable account days.</p>
<p>That sounds like a nice situation and something we are considering. We are comparing Schwab, Fidelity & Vanguard, but willing to consider others. Think we’re leaning away from Vanguard because their minimum gift is $500, which is larger than some of the donations we prefer to give.</p>
<p>Sweetbeet, I’m a bit conflicted about HCF. They seem to have a considerable turnover rate and I’m a bit ambivalent of some of their staff. I can’t figure out whether it’s their staff or our State Department of Health that is creating some of the very odd decisions related to large grants they’ve funded that I’m aware of. I strongly suspect their administrative fees are much higher than the ones offered by the brokerage firms of 60 basis points/year for smaller (under $100,000) donations.</p>
<p>@HIMom - I would be interested in hearing what your comparison between the three firms shows.</p>
<p>I just looked at the administration fee for Vanguard and Fidelity and it is actually the same for the first $500,000 (60 basis points) at each firm</p>
<p>If you select one of the Fidelity Index options, then the total fees are only slightly higher than Vanguard. </p>
<p>So I was incorrect in stating above that Vanguard has lower fees - the savings are insignificant.</p>
<p>FWIW, several people who I consider to be financially astute have either set up Donor-Advised Funds or are considering doing so - all with appreciated securities.</p>
<p>So far, the biggest difference I can see is that with Fidelity, you can give “grants” as low as $50 compared with Vanguard having it’s lowest “grant” of $500. All of them seem to have the same administrative fee and similar investment fee (if you plan to use an index fund or similar while it’s sitting in the Donor Advised Fund.</p>
<p>I like the feature that Fidelity has of the electronic “gift of giving” cert you can give others to name a charity to receive $50 (or any higher amount you gift). That seems a nice way for you to offer another person the opportunity to select a charity (you have already gotten the tax deduction for putting the funds into your DAF), Am unaware if any of the other companies allow this feature. Seems to be a nice thing to give for those who have everything. :)</p>
<p>OK–lots to contemplate. I guess to make sure fees don’t eat up your DAF, it’s good to have a sufficiently large donation so that it’s 60 basis point administrative fee rather than $100 out of $5000 or 2%. I guess the sweet spot for being sure you aren’t paying a huge % of your donation toward administrative fees is at least $16,750 or more, making the administrative fees back down to 60 basis points (since there is a minimum administrative charge of $100/year or 60 basis points–whichever is higher).</p>
<p>Will mull the matter over when we vacation this week with our folks.</p>
<p>No, this is different than a charitable family trust:</p>
<p>This would be more like a poor man’s foundation. You get Fidelity, Vanguard, or Schwab to handle all the bureaucratic “stuff” for you for 60 basis points.</p>