Setting up first DAF - A Few Questions

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fpt1988
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Setting up first DAF - A Few Questions

Post by fpt1988 »

My wife and I have been contemplating charitable giving and DAFs for a while and have concluded that we would like to open a DAF.

Based on all of the research and many threads, it appears Fidelity is the most common answer as the best provider for most people and for the dollar amount we are looking to start with as well.

We're still thinking through the exact amount, but likely will contribute $25K-$30K to open the DAF.

Based on what I read it sounds like the first decision is the goal of the length of the DAF. Our goal would not be to distribute all of the money in a few years, but rather create a more sustainable medium to long term fund. I could see us making a similar contribution ($25K-$30K) in the next 1-4 years which could either increase the amount gifted each year or just increase the long term sustainability of the fund.

I had a few questions, some that seem simple, but wanted to make sure I am understanding this correctly.

We have 2-3 organizations in particular in mind that we would like to support. Say we put $30K in, my initial thought is we would distribute say $3K per year from the account, maybe up to $5K. For this example, say we decide to put $30K in and distribute $1K each to 3 different organizations that year.

1) Do most people donate the $1K to each organization all at once? Monthly? Quarterly?
2) Say we go this route, do we pull $3K out of the $30K on Day 1 and invest the remaining $27K?
3) Given our medium to long term mindset, it sounds like a 50/50 Total Index / Total Bond might be the most common allocation?

In terms of the tax benefit and our situation. We are high income household, max out 401Ks and fund a 529 for child, but don't really have much to itemize and this would be the first time doing so. The other big item I have read is medical and dental expenses, but it appears that would not be applicable due to the rule around itemizing only expenses that exceed 7.5% of AGI.

Based on my minimal understanding, we would hit the $10,000 for SALT and have about $9K in mortgage interest, so roughly $19,000 to itemize + the $30K DAF for total itemized deductions of $49,000.

Our tax "savings" if we itemize then would be the equivalent of $49,000, which compared to taking the standard deduction of $24,800 as MFJ, would mean that the net benefit financially would be an itemized deduction of $49,000 - $24,800 = $24,200.

In terms of the most basic understanding, between federal and state taxes, that puts us in the approximate 43% tax camp at the highest level. Is a very elementary understanding here that if we do not donate anything, the $30,000, we would be receiving $30,000 - 43% = $17,100 after tax OR we can donate $30,000 which will offset our taxable income by $30,000, "saving" us $12,900 ($30K * .43) that we would otherwise pay in taxes, and then have $30K to fund the DAF.

Planning to call Fidelity sometime soon, but wanted to ask some questions here before doing so to make sure I am understanding this all correctly?
evestor
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Re: Setting up first DAF - A Few Questions

Post by evestor »

Congrats on this decision to have a new form of impact in the world!
fpt1988 wrote: Wed Jun 16, 2021 11:21 pm Based on all of the research and many threads, it appears Fidelity is the most common answer as the best provider for most people and for the dollar amount we are looking to start with as well.
FWIW I use Fidelity and have had a fantastic experience from the start.
fpt1988 wrote: Wed Jun 16, 2021 11:21 pm 1) Do most people donate the $1K to each organization all at once? Monthly? Quarterly?
It depends upon what you are donating in. I donate less often because my appreciated security is a bunch of paperwork to donate. But some others do more. It's really up to you, what you're donating in (hopefully long term appreciated securities) and the friction associated with it.
fpt1988 wrote: Wed Jun 16, 2021 11:21 pm 3) Given our medium to long term mindset, it sounds like a 50/50 Total Index / Total Bond might be the most common allocation?
There's no single school of thought here. You'll find different folks do different things. The people I know tend to be very conservative. Everyone is different.
fpt1988 wrote: Wed Jun 16, 2021 11:21 pm In terms of the tax benefit and our situation. We are high income household, max out 401Ks and fund a 529 for child, but don't really have much to itemize and this would be the first time doing so. The other big item I have read is medical and dental expenses, but it appears that would not be applicable due to the rule around itemizing only expe
I would point out if you typically do not itemize but now donate enough to make itemization worth it, then clustering your donations will have more an effect as you will have more $ over the hurdle that has the itemization value. Worth considering this as you decide how to give in to your DAF.
Worth talking to your tax pro about your plan here for feedback.

Good luck.
shess
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Re: Setting up first DAF - A Few Questions

Post by shess »

First, read up on donation of securities with long-term capital gains. Basically, for securities with a long-term holding period, you deduct the entire value of the donation AND avoid paying taxes on the gains you gave away. IMHO, this is the really big compelling reason for a DAF - if you're donating cash, or short-term securities, it is less compelling. Not useless or anything, just less strength to it, because you do pay a bit higher ER in a DAF. Notably, if you have securities with long-term capital gains, and you also have cash, I think it is always advantageous to donate the securities and invest the cash into the same securities, rather than donating the cash directly. [This paragraph only really applies if you have securities in a taxable account.]

I think your understanding of the tax consequences is in the right ballpark. As someone else mentioned, batching can be useful. Or, if you are planning to later pay down your mortgage, it might make sense to do DAF contributions while the mortgage is high and gets you closer to itemizing. Just be careful not to let the tail wag the dog.

As far as allocation, I just allocate it as part of our overall portfolio. To me, I could keep the assets in the taxable account and donate them from there, or shift them to the DAF, and that's just a decision about placement, it doesn't materially change anything. That said, most options in a DAF are pretty mundane, so it's just a mix of total-market and total-intl.

We donate appreciated securities on a sporadic basis. Last year I donated some to neutralize the tax hit from selling some. We have some highly-appreciated employer stock which is what we donate to the DAF, so sometimes I'll donate some simply because I need to cut our position to keep under my goal percentage.

We make various grants. We have a raft of yearly grants in the $1k-$5k range. We have a monthly grant to our church. I also routinely give spot grants, like if a friend or relative posts on Facebook about fundraising for a charity they like, if they look like they do good work I might login and send $500 their way. Just note that the rules state that you can't use DAF contributions to meet an obligation. My policy is to not make pledges from the DAF, because I find the information unclear about that (my response is to just never play the pledge game at all, I'll just send money, or I won't send money, but I won't make promises about sending money).

We use Vanguard Charitable, which has a $500 grant minimum. I have considered getting a Fidelity or Schwab DAF, which allow for lower minimums. You GENERALLY can fund a DAF from another DAF, but it's not a regulation or anything, so check with the DAF in question about that. I understand that there is some suspicion that people play games with this to make it look like they are making grants, but are actually just cycling between DAFs (I don't know why anyone would do this, though. Ego?).

I was able to get matching funds from my employer when using our DAF. Your mileage may vary. To this end, our DAF is titled "My Full Name Family Fund", to make match requests easier to match up.
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Stinky
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Re: Setting up first DAF - A Few Questions

Post by Stinky »

We love our Fidelity DAF. All the rest of our money is at Vanguard, but the lower minimums for both contributions and grant size make Fidelity the choice for us. Both the app and the website are easy to use. Most all of the charities that we want to donate to are already on the Fidelity "approved" list, and it's not a lot of bother to get a new charity added (we've done that a couple of times).

On your tax savings, you should consider the additional tax savings from not paying capital gains tax on any long-term securities that you donate to the DAF.

As to investments, we have our DAF entirely invested in the Total Market index. We're running about 80% equities overall, and I see no particular reason to keep fixed income in the DAF. Of course, you could take a different approach.

We fund a number of local charities and our church with recurring monthly grants from the DAF. Fidelity makes it easy to initiate, update, and cancel a monthly grant, and there's no additional cost to you for granting monthly instead of less frequently like annually.

Congratulations on looking into a DAF! It's a worthwhile thing for us.
It's a GREAT day to be alive! - Travis Tritt
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Wiggums
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Re: Setting up first DAF - A Few Questions

Post by Wiggums »

Stinky wrote: Thu Jun 17, 2021 4:59 am We love our Fidelity DAF. All the rest of our money is at Vanguard, but the lower minimums for both contributions and grant size make Fidelity the choice for us. Both the app and the website are easy to use. Most all of the charities that we want to donate to are already on the Fidelity "approved" list, and it's not a lot of bother to get a new charity added (we've done that a couple of times).

On your tax savings, you should consider the additional tax savings from not paying capital gains tax on any long-term securities that you donate to the DAF.

As to investments, we have our DAF entirely invested in the Total Market index. We're running about 80% equities overall, and I see no particular reason to keep fixed income in the DAF. Of course, you could take a different approach.

We fund a number of local charities and our church with recurring monthly grants from the DAF. Fidelity makes it easy to initiate, update, and cancel a monthly grant, and there's no additional cost to you for granting monthly instead of less frequently like annually.

Congratulations on looking into a DAF! It's a worthwhile thing for us.
We copied Stinky’s DAF and we are very happy with it. The initial funding amount and distribution minimum was perfect for us. When the market is good to us, it’s a no brainer to add more yo our DAF.
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Cheez-It Guy
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Re: Setting up first DAF - A Few Questions

Post by Cheez-It Guy »

OP, where are your taxable funds invested? Which brokerage provider?
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fpt1988
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Re: Setting up first DAF - A Few Questions

Post by fpt1988 »

Cheez-It Guy wrote: Thu Jun 17, 2021 5:37 am OP, where are your taxable funds invested? Which brokerage provider?
All taxable is with Vanguard, VTSAX for the most part and some VTIAX.
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fpt1988
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Re: Setting up first DAF - A Few Questions

Post by fpt1988 »

Lots of great information here so far.

One topic I had not thought through yet is funding with cash vs donating appreciated securities.

I have VTSAX at Vanguard that I guess could be an option here? Current game plan for taxable is not to sell anything, it will just sit in there for several decades.

What would be the pros and cons of funding with cash vs funding the same $30K with the sale of VTSAX from my taxable? In the event I donated the stock, I guess I would then just re-buy $30K worth of VTSAX in taxable?

What are the tax differences between these two options?
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Re: Setting up first DAF - A Few Questions

Post by Stinky »

fpt1988 wrote: Thu Jun 17, 2021 9:31 am Lots of great information here so far.

One topic I had not thought through yet is funding with cash vs donating appreciated securities.

I have VTSAX at Vanguard that I guess could be an option here? Current game plan for taxable is not to sell anything, it will just sit in there for several decades.

What would be the pros and cons of funding with cash vs funding the same $30K with the sale of VTSAX from my taxable? In the event I donated the stock, I guess I would then just re-buy $30K worth of VTSAX in taxable?

What are the tax differences between these two options?
Let’s say that you have $30k of VTSAX with a basis of $20k.

If you fund DAF with $30k cash, you will get a $30k deduction, and still have the stock with basis of $20k.

If you fund DAF with $30k of appreciated VTSAX, you will get a $30k deduction. And then you can use your cash to buy $30k of VTSAX, which will have a basis of $30k.

Even if you don’t plan to sell VTSAX for decades, I’d rather have a basis of $30k instead of $20k.

To me the choice is clear. Fund a DAF with appreciated securities when you can.
It's a GREAT day to be alive! - Travis Tritt
retiringwhen
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Re: Setting up first DAF - A Few Questions

Post by retiringwhen »

fpt1988 wrote: Thu Jun 17, 2021 9:31 am Lots of great information here so far.

One topic I had not thought through yet is funding with cash vs donating appreciated securities.

I have VTSAX at Vanguard that I guess could be an option here? Current game plan for taxable is not to sell anything, it will just sit in there for several decades.

What would be the pros and cons of funding with cash vs funding the same $30K with the sale of VTSAX from my taxable? In the event I donated the stock, I guess I would then just re-buy $30K worth of VTSAX in taxable?

What are the tax differences between these two options?
Get the increased cost basis (always a good thing) by donating shares to DAF, then buying back those shares with new cash. Voila! tax-avoidance on the capital gains, and the same value to the DAF. This comes at a minor cost of paperwork compared to cash, but once you do it a couple times it is pretty straightforward. We have been donating shares from vanguard brokerage to Fidelity DAF for several years this way and have it down to a 15 minute effort (I wrote down details instructions for my wife and she does it several times a year.)

BTW, I use the donation process for moving the edges of any asset that is over allocation too, allowing for a cheap (Free?) way to help reduce over allocations in taxable if/when that happens.
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Re: Setting up first DAF - A Few Questions

Post by ruud »

fpt1988 wrote: Thu Jun 17, 2021 9:31 am I have VTSAX at Vanguard that I guess could be an option here? Current game plan for taxable is not to sell anything, it will just sit in there for several decades.
If your current assets are at Vanguard, the donation process to Vanguard Charitable is very easy (can be done online with a few clicks). But... Vanguard Charitable has a higher initial minimum ($25k) and higher donation minimums ($500). If you can live with those, it's worth considering for the convenience.
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fpt1988
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Re: Setting up first DAF - A Few Questions

Post by fpt1988 »

Stinky wrote: Thu Jun 17, 2021 9:37 am
fpt1988 wrote: Thu Jun 17, 2021 9:31 am Lots of great information here so far.

One topic I had not thought through yet is funding with cash vs donating appreciated securities.

I have VTSAX at Vanguard that I guess could be an option here? Current game plan for taxable is not to sell anything, it will just sit in there for several decades.

What would be the pros and cons of funding with cash vs funding the same $30K with the sale of VTSAX from my taxable? In the event I donated the stock, I guess I would then just re-buy $30K worth of VTSAX in taxable?

What are the tax differences between these two options?
Let’s say that you have $30k of VTSAX with a basis of $20k.

If you fund DAF with $30k cash, you will get a $30k deduction, and still have the stock with basis of $20k.

If you fund DAF with $30k of appreciated VTSAX, you will get a $30k deduction. And then you can use your cash to buy $30k of VTSAX, which will have a basis of $30k.

Even if you don’t plan to sell VTSAX for decades, I’d rather have a basis of $30k instead of $20k.

To me the choice is clear. Fund a DAF with appreciated securities when you can.
Thank you and for the very easy to understand explanation.

One more elementary question. So say I fund the DAF with $30K of VTSAX from my taxable and it goes into a DAF at Fidelity.

Does the DAF at Fidelity now own those shares of VTSAX or do the shares get sold and the DAF now has that cash position of $30K which would then need to be invested? Meaning, can the DAF at Fidelity hold VTSAX?
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Re: Setting up first DAF - A Few Questions

Post by ruud »

fpt1988 wrote: Thu Jun 17, 2021 10:15 am Does the DAF at Fidelity now own those shares of VTSAX or do the shares get sold and the DAF now has that cash position of $30K which would then need to be invested? Meaning, can the DAF at Fidelity hold VTSAX?
I don't know about Fidelity's DAF but Vanguard Charitable would sell it immediately, and let you invest the proceeds in any of their dozen-and-a-half investment options (one of which is "total US Stock Market" which under the covers again likely invests in VTSAX). It looks like Fidelity's DAF works similarly: link
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Stinky
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Re: Setting up first DAF - A Few Questions

Post by Stinky »

fpt1988 wrote: Thu Jun 17, 2021 10:15 am One more elementary question. So say I fund the DAF with $30K of VTSAX from my taxable and it goes into a DAF at Fidelity.

Does the DAF at Fidelity now own those shares of VTSAX or do the shares get sold and the DAF now has that cash position of $30K which would then need to be invested? Meaning, can the DAF at Fidelity hold VTSAX?
Fidelity would sell VTSAX. You could then choose to have Fidelity DAF put it in their Total Market Index, whose underlying fund is FSKAX. That’s where my Fidelity DAF money is.
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Re: Setting up first DAF - A Few Questions

Post by reddison »

We also set up a DAF at the end of last year for the first time. Even though nearly all of our investments are with Vanguard, we set it up with Fidelity due to the lower minimum donation levels. We are extremely happy with it. An important consideration for us was the fact that we were both retiring and last year would be our last year of really high income. We had highly appreciated stock with a value of around $80,000. Fidelity was able to transfer it all in kind, then we sold it and put into a total stock fund. This gave us multiple tax benefits. We avoided the tax on the gains, took the $80,000 in charitable deductions on our 2020 taxes, plus other itemized deductions, instead of the standard deduction. Since then we made a lot of charitable donations and our balance has increased (of course I know we could experience losses in the stock fund as well). As long as this money lasts we will take the standard deduction. But we can add additional funds to it in the future and possibly itemize again.
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Re: Setting up first DAF - A Few Questions

Post by BrokerageZelda »

fpt1988 wrote: Thu Jun 17, 2021 10:15 am Does the DAF at Fidelity now own those shares of VTSAX or do the shares get sold and the DAF now has that cash position of $30K which would then need to be invested? Meaning, can the DAF at Fidelity hold VTSAX?
Generally, the shares get sold ASAP and you can specify which of their in-house DAF funds you want the proceeds allocated to.

The big DAFs have their own 'in-house DAF funds' that roughly mirror their major asset class mutual funds, including money markets, but which also conveniently include their AUM charge in the expense ratio. If you look carefully at the full terms and conditions, you'll see that the 'reduced fees' for large DAF balances are given in the form of periodic partial refunds of the 0.60% base AUM fee that everyone else pays in the fund expense ratios. (I learned this when my Fidelity DAF balance invested entirely in the DAF money market fund immediately broke the buck because I was getting roughly -0.60% return. I moved the balance into a stock/bond mix after seeing that.)
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fpt1988
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Re: Setting up first DAF - A Few Questions

Post by fpt1988 »

Stinky wrote: Thu Jun 17, 2021 10:25 am
fpt1988 wrote: Thu Jun 17, 2021 10:15 am One more elementary question. So say I fund the DAF with $30K of VTSAX from my taxable and it goes into a DAF at Fidelity.

Does the DAF at Fidelity now own those shares of VTSAX or do the shares get sold and the DAF now has that cash position of $30K which would then need to be invested? Meaning, can the DAF at Fidelity hold VTSAX?
Fidelity would sell VTSAX. You could then choose to have Fidelity DAF put it in their Total Market Index, whose underlying fund is FSKAX. That’s where my Fidelity DAF money is.
Ok understood. I think I am with you now. So on Day 1, it accomplishes the same exact thing for the DAF as writing a check for $30K. Instead, VTSAX gets donated, it is then sold, the account now has that same $30,000, which would then be invested based on the options available at Fidelity, such as FSKAX as you outlined above.

I then rebuy $30K in my taxable account and have a new basis of $30K vs what it was prior (the $20K in your example).

Seems like a no brainer then to go this route, unless there is something else I am missing.
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Re: Setting up first DAF - A Few Questions

Post by Stinky »

fpt1988 wrote: Thu Jun 17, 2021 10:30 am Seems like a no brainer then to go this route, unless there is something else I am missing.
You’re not missing anything.

You are being charitable. You get a nice tax deduction. You get a higher basis in your VTSAX.

It’s a true win-win-win. Triple win.
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Re: Setting up first DAF - A Few Questions

Post by retiringwhen »

One possible complication with DAF mutual fund / ETF donations. There are lower limits on annual charitable gifts of appreciated securities on your Federal Income tax return. I would read the relevant IRS pub (don’t have it handy) to make sure you know those limits.

There are two limits around 30% and 60% of AGI that may be relevant.

You don’t loose the deduction, it must capped and carried over on year you hit the limits.
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fpt1988
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Re: Setting up first DAF - A Few Questions

Post by fpt1988 »

retiringwhen wrote: Thu Jun 17, 2021 11:07 am One possible complication with DAF mutual fund / ETF donations. There are lower limits on annual charitable gifts of appreciated securities on your Federal Income tax return. I would read the relevant IRS pub (don’t have it handy) to make sure you know those limits.

There are two limits around 30% and 60% of AGI that may be relevant.

You don’t loose the deduction, it must capped and carried over on year you hit the limits.
Good point, I saw this on one of the articles online, but this will not be an issue for us.
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Re: Setting up first DAF - A Few Questions

Post by shess »

fpt1988 wrote: Thu Jun 17, 2021 10:30 am Ok understood. I think I am with you now. So on Day 1, it accomplishes the same exact thing for the DAF as writing a check for $30K. Instead, VTSAX gets donated, it is then sold, the account now has that same $30,000, which would then be invested based on the options available at Fidelity, such as FSKAX as you outlined above.

I then rebuy $30K in my taxable account and have a new basis of $30K vs what it was prior (the $20K in your example).

Seems like a no brainer then to go this route, unless there is something else I am missing.
You are not missing anything. It's a lot like tax-loss harvesting, except that since there's no loss, there's no need to worry about wash sales.

Note that this ONLY works with long-term holdings. Short-term holdings are calculated differently, and AFAICT work the same as selling and then donating the proceeds from the sale. There might be something subtle in there I'm missing.

In fact, this works best with your highest-appreciation stock. For instance, we have some shares from an employer which are basically 99.99% gains, some total-market shares from 2008 which are up 400%, and some total-international shares from 2008 which are up 85%. So if we donate $10k of the employer shares, we get a $10k deduction AND avoid LTCG on $9999. Donating $10k of the total-market would avoid LTCG on $8k, while donating $10k of the total-international would avoid LTCG on $4500. Obviously, in each case the benefit to us is greater than $10k, but clearly one bin is more productive for us to donate from!
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Re: Setting up first DAF - A Few Questions

Post by StealthRabbit »

...
Similar for us...
fpt1988 wrote: Wed Jun 16, 2021 11:21 pm Based on all of the research and many threads, it appears Fidelity is the most common answer as the best provider for most people and for the dollar amount we are looking to start with as well.
I use Fidelity and have had a fantastic experience .... Fidelity is well set up with many charities already listed as available
fpt1988 wrote: Wed Jun 16, 2021 11:21 pm 1) Do most people donate the $1K to each organization all at once? Monthly? Quarterly?
It depends upon what you are donating to. I donate less often because my appreciated security is a bunch of paperwork to donate. ... More $$ and Less often ...(saves everyone paperwork) and I time donations for when charity can use it most (during thier low months... I ask the charity)
fpt1988 wrote: Wed Jun 16, 2021 11:21 pm 3) Given our medium to long term mindset, it sounds like a 50/50 Total Index / Total Bond might be the most common allocation?
I use my std allocation, but more aggressive in DAF, usually 80% equity and keep 20 % or at least the annual gifting amount in cash instruments. You can decide how your gift is met / funded (from different allocation than your investment)
fpt1988 wrote: Wed Jun 16, 2021 11:21 pm In terms of the tax benefit and our situation. We are high income household, max out 401Ks and fund a 529 for child, but don't really have much to itemize and this would be the first time doing so. The other big item I have read is medical and dental expenses, but it appears that would not be applicable due to the rule around itemizing only expe
...clustering your donations ... Worth considering this as you decide how to give in to your DAF.
Worth talking to your tax pro about your plan here for feedback.

##########

Our DAF is mature, so we seldom add to it, we gift ~10% outbound and it typically grows 10 - 20%, annually = self supporting. (we are retired, no more stock options coming). May use it for tax benefits for windfalls in the future (property sales), likely spend it down in anticipation of RMD / QCD. (age 72). DAF is part of our Estate plan, heirs will be subsequent managers (according to our stated purposes)
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Re: Setting up first DAF - A Few Questions

Post by CAsage »

fpt1988 wrote: Wed Jun 16, 2021 11:21 pm 1) Do most people donate the $1K to each organization all at once? Monthly? Quarterly?
Early each January I do my annual DAF grants in one session, and then download a copy of each grant to PDF. I have a 50% corporate Charity Match from my former employer (retiree benefit) so it's easier for me to do this once (vs monthly), then enter and upload to BigEmployer. Pay attention to the EIN the first time you set these up, as there are many branches/local chapters of big name charities, and you want any granting to match the gift response. It's super nice after you set them up the first year, just click each one, add the dollar value and check out!
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Re: Setting up first DAF - A Few Questions

Post by Cheez-It Guy »

fpt1988 wrote: Thu Jun 17, 2021 9:27 am
Cheez-It Guy wrote: Thu Jun 17, 2021 5:37 am OP, where are your taxable funds invested? Which brokerage provider?
All taxable is with Vanguard, VTSAX for the most part and some VTIAX.
Your giving plans sound large enough to work at Vanguard Charitable. If you do that, it can be linked with your taxable account for donation all online with no forms at all and no time out of the market. You could keep donated funds in the institutional class of VTSAX if you choose -- VITSX.

I actually carried out a donation earlier this week. Below is a slightly modified version of a previous post in another DAF topic:

----------

As information, [Monday] I made a contribution to Vanguard DAF from Vanguard of appreciated mutual fund shares (held for over a year). I reached the confirmation screen just after 3:55 PM Eastern. The donated shares are gone from Vanguard and the balance is available at Vanguard Charitable as of [Tuesday] morning. All online. No paperwork and no assistance required. Completed within 5 minutes of market close. Not bad.

----------

I actually started at Fidelity Charitable due to the smaller account opening requirements and then rolled it to Vanguard Charitable when the balance was large enough so I could have the simplicity of linked accounts, but Fidelity was fine. Most people that recommend it do so because of the smaller minimums, but I never used it for small disbursements, so it didn't really matter. Fidelity Charitable has an iOS app. Vanguard Charitable doesn't (at least not yet).
Kompass
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Re: Setting up first DAF - A Few Questions

Post by Kompass »

I am enjoying using my Fidelity DAF however, what is the best idea when you want to give to worthy folk/entities that are not tax-exempt?
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Stinky
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Re: Setting up first DAF - A Few Questions

Post by Stinky »

Kompass wrote: Sat Jun 19, 2021 9:22 pm I am enjoying using my Fidelity DAF however, what is the best idea when you want to give to worthy folk/entities that are not tax-exempt?
For non-exempt situations, cash always works; checks are appreciated; money orders, too. :D
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mffl
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Re: Setting up first DAF - A Few Questions

Post by mffl »

Echoing some of the other posters, bunch as much as possible in order to maximize your overage beyond the standard deduction (subject to the 30%/60% AGI limits).

It's already nearly July. I'd delay this year's contribution until Jan 1 2022 and then make next year's contribution as normal
sometime in 2022 and maybe even the subsequent year before Dec 31 2022. Bunching is your friend. It usually makes sense to at least time DAF contributions into every other year.

Also, Fidelity makes it super easy to contribute specific tax lots if you have appreciated securities and to determine which ones make the most sense to contribute, assuming those appreciated securities already exist at Fidelity. Again, as another poster stated, this is where DAF's really shine. They're not very good at churning current year contributions into near term grants. At that point you might as well just take the regular charitable deduction and skip the DAF. You really need to take advantage of bunching and/or donating appreciated securities, or all you get is the ability to make your charitable recipients wait for a while and pay a higher ER for the privilege.
scotthal
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Re: Setting up first DAF - A Few Questions

Post by scotthal »

Bulk of my taxable assets are w/Vanguard. I donate appreciated mutual fund shares to my Vanguard Charitable DAF acct; & have an annual grant set up from Vanguard Charitable to my Fidelity Charitable DAF acct. Fidelity is significantly more flexible for disbursement (lower minimum, eGifts).
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Tubes
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Re: Setting up first DAF - A Few Questions

Post by Tubes »

We use Vanguard Charitable. I almost made a donation (transfer) to Fidelity Charitable in order to grant smaller amounts. However, I stopped short of doing that with the new $600 per year cash deduction law. We usually want to give out a few $50 or $100s here and there per year. With the new tax law, we just use cash for that. I still wish VG Charitable would go down to $100 or so. Oh well.

The OP asked about how to donate. One thing we like to do is set up quarterly donations to some organizations for the year. Set it and forget it. It tends to help them predict their income a bit better.
Gill
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Re: Setting up first DAF - A Few Questions

Post by Gill »

scotthal wrote: Sun Jun 20, 2021 1:49 pm Bulk of my taxable assets are w/Vanguard. I donate appreciated mutual fund shares to my Vanguard Charitable DAF acct; & have an annual grant set up from Vanguard Charitable to my Fidelity Charitable DAF acct. Fidelity is significantly more flexible for disbursement (lower minimum, eGifts).
I did that for a while also but eventually closed the Fidelity DAF figuring it was too confusing and too much trouble to maintain two DAF's. Just give every charity at least $500.
Gill
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CloseEnough
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Re: Setting up first DAF - A Few Questions

Post by CloseEnough »

I’ve found Schwab DAF easy to use.
Rus In Urbe
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Re: Setting up first DAF - A Few Questions

Post by Rus In Urbe »

Congratulations on the decision to set up a DAF! Good choice. We set ours up five years ago at Vanguard (which I recommend) and it has simplified our philanthropy.

Two points:

1. MINIMUM GRANTS: Many Bogleheads prefer Fidelity over Vanguard because of Vanguard's MINIMUM GRANT of $500. I urge you to consider the following, which comes from more than forty years of experience working in and with nonprofit organizations: SMALL donations create huge headaches for nonprofits, entailing extra administrative work that eats into the value of the donation. It is FAR better for you to give $500 to one charity than to parcel it out as $100 to five charities. Few donors think about this and it's a pity. In the very few instances where we need to give out less than $500, we simply write a check.

2. [Comment speculating on changes to legislation removed by moderator oldcomputerguy]

So, welcome to the DAF club! :sharebeer
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shess
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Re: Setting up first DAF - A Few Questions

Post by shess »

Rus In Urbe wrote: Mon Jun 21, 2021 9:41 am 1. MINIMUM GRANTS: Many Bogleheads prefer Fidelity over Vanguard because of Vanguard's MINIMUM GRANT of $500. I urge you to consider the following, which comes from more than forty years of experience working in and with nonprofit organizations: SMALL donations create huge headaches for nonprofits, entailing extra administrative work that eats into the value of the donation. It is FAR better for you to give $500 to one charity than to parcel it out as $100 to five charities. Few donors think about this and it's a pity. In the very few instances where we need to give out less than $500, we simply write a check.
I am not sure this follows, though. I might totally misunderstand the DAF-charity relationship, but my understanding is that by requesting a Vanguard Charitable grant to a charity, I am requesting Vanguard Charitable to send them a check (or electronic transaction if they've done the legwork). I wouldn't expect a check from my checking account to be materially easier than a check from my DAF's checking account.

I get that on the DAF side, it's the same overhead to cut a $50 check as to cut a $50,000 check, so having a lot of tiny checks adds to administrative overhead which bumps up the admin fees. But even there, I suspect they've really automated things, because their admin-fee breaks happen at pretty substantial asset levels (which likely correspond to higher average grant levels).

For me, it's more that if I don't feel $500 strongly for the charity, I have to question if I actually feel the donation is a good value, or if I'm just trying to pay them $25 to leave me alone.
Rus In Urbe
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Re: Setting up first DAF - A Few Questions

Post by Rus In Urbe »

Rus In Urbe wrote: ↑Mon Jun 21, 2021 10:41 am
1. MINIMUM GRANTS: Many Bogleheads prefer Fidelity over Vanguard because of Vanguard's MINIMUM GRANT of $500. I urge you to consider the following, which comes from more than forty years of experience working in and with nonprofit organizations: SMALL donations create huge headaches for nonprofits, entailing extra administrative work that eats into the value of the donation. It is FAR better for you to give $500 to one charity than to parcel it out as $100 to five charities. Few donors think about this and it's a pity. In the very few instances where we need to give out less than $500, we simply write a check.
I am not sure this follows, though. I might totally misunderstand the DAF-charity relationship, but my understanding is that by requesting a Vanguard Charitable grant to a charity, I am requesting Vanguard Charitable to send them a check (or electronic transaction if they've done the legwork). I wouldn't expect a check from my checking account to be materially easier than a check from my DAF's checking account.

shess » wrote:
I get that on the DAF side, it's the same overhead to cut a $50 check as to cut a $50,000 check, so having a lot of tiny checks adds to administrative overhead which bumps up the admin fees. But even there, I suspect they've really automated things, because their admin-fee breaks happen at pretty substantial asset levels (which likely correspond to higher average grant levels).

For me, it's more that if I don't feel $500 strongly for the charity, I have to question if I actually feel the donation is a good value, or if I'm just trying to pay them $25 to leave me alone.
Hi shess!
Not sure you got my point....

THE NONPROFIT (not Vanguard's DAF) has to process the tiny check from you or from your DAF----that $50 or the $100---and has to pay someone to write you a thank-you note and then notate it and take that check to the bank. All that costs administrative time for the nonprofit. By the time they process a $50 check, it's costing the nonprofit a bit of it with little left over. So send LARGER checks to fewer charities----it will make your gift much more effective.

Of course, the DAFs at Vanguard or Fidelity have admin costs to issuing checks. That was not my point or concern.

Please don't send $25 to a nonprofit to "leave you alone." It costs them money and they will keep you on the donor list just in case you win the lottery. ;-) Just don't send anything at all and eventually they will leave you be.

All best, Rus
I'd like to live as a poor man with lots of money. ~Pablo Picasso
shess
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Re: Setting up first DAF - A Few Questions

Post by shess »

Rus In Urbe wrote: Mon Jun 21, 2021 10:43 am Hi shess!
Not sure you got my point....

THE NONPROFIT (not Vanguard's DAF) has to process the tiny check from you or from your DAF----that $50 or the $100---and has to pay someone to write you a thank-you note and then notate it and take that check to the bank. All that costs administrative time for the nonprofit. By the time they process a $50 check, it's costing the nonprofit a bit of it with little left over. So send LARGER checks to fewer charities----it will make your gift much more effective.
I might have missed something, then, because in your earlier post you said that if you want to give out less than $500, you just write a check. I'm just saying a check is a check, if you prefer to give small amounts, I don't think a low-minimum DAF is worse for the recipient than writing them a check from your own account.

I agree that it's better to give charities larger amounts less frequently. We hit most of ours on a yearly schedule, except for our church which we hit monthly because having a steady payment stream in that case seems more directly relevant to us (also, being a church, I'm 100% certain they have a solid process in place to work this job on a weekly basis). To that end, having a modestly-high minimum works as a nice form of discipline, we focus on what we want to do, not on just kinda spraying things all over the place. In addition to the overhead of accepting payments, IMHO it's simply a better idea to evaluate a few charitable options in an area of interest and choose one you prefer for reasons which make sense to you, as opposed to just giving 1/4 of the amount to four different targets "because I should". That sense of identification is more likely to lead to more personal investment and greater giving in the future.

As far as sending charities small amounts to leave you alone ... that's actually not me, it's my wife. I used to see all sorts of random debits for charities which she never expressed interest in, but were the kind to knock on doors or staff a post outside of a retail location. After we got a DAF, I think she switched to "Sorry, my husband handles that", and her follow-up action is to never tell me about it :-).
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