Recommendations on a DAF provider

[tomsense76]

Thanks all for your advice on different situations I've been addressing. Am interested in getting your advice on another decision I'm trying to make and would appreciate your thoughts, feedback, and advice.

I'd like to start giving more to charity. As more of my assets are in the form of equities, it would be easier for me to donate shares instead of cash. Though I'd like to do this in a way that cuts down on the complexity for charities handling the donation. Ideally I'd like the charities to just get cash in the form of a check than try to deal with transferring some shares from my brokerage to there's (assuming that is even an option as it might not be with smaller, local charities). While I could sell the shares and donate cash, this would trigger a tax, which either would eat into the donation or would put me in the situation of covering this tax with other funds. So would prefer to donate the shares directly somehow (without having to sell them myself) that wouldn't burden the charity (they still receive cash).

While not the goal of charity, it would be nice if I could receive the itemized deduction when I donate. Since I don't otherwise itemize (rent so no mortgage, no state income tax, etc.), it makes more sense to do a larger donation in one year (possibly covering donations for a few years); however, it may be better for charities to have some consistent cashflow to plan around (receiving donations annually, quarterly, or perhaps even monthly). As this can prove logistically challenging when combined with the donations of shares, trying to meet the requirements before the end of the tax year, and having good records both for myself and when the IRS inevitably inquires about these lumpy donations over the years, some sort of vehicle to help manage these donations seems quite helpful.

After thinking about these constraints and reading up here and elsewhere, it seems like a Donor Advised Fund (DAF) would fit these needs perfectly. Namely I can front load a few years of donations pretty easily. The DAF then tracks this information for reporting purposes. Within the DAF, I can transition from a more aggressive investment style I have for myself to a more conservative one to help preserve the funds as they get doled out to charities over the years. Finally the DAF can just send checks to the charities keeping things simple for them to receive.

If it's relevant my portfolio can be seen here ( viewtopic.php?p=5591362#p5591362 ), though I'm guessing it doesn't matter much for this question. What probably is important is the shares that I would like to donate are either at Vanguard in the form of Vanguard mutual funds or at Schwab in the form of individual shares in form of ESPP and RSU.

Given this, I have some questions:

1. Does my understanding of DAFs seem correct or am I missing things?
2. Is using a DAF for this purpose reasonable? Or are there other reasonable options I'm missing?
3. Where would be a good place to setup this DAF and why? (FWIW I have accounts with Fidelity, Schwab, and Vanguard, which all seem to offer this)
4. If transferring shares between brokerages is involved, how difficult is this? (I suppose having multiple DAFs could avoid this, but would prefer to just have one to keep things easy to manage)
5. Also has one had experience doing this with ESPP or RSU shares? Anything to be aware of in this case?
6. Anything else I might be missing?

Thanks in advance for your thoughts and feedback!

[stan1]

If you have appreciated securities in a taxable account and plan to give to multiple charities I would recommend using a DAF. It's simpler.

I recommend Fidelity Charitable. They have reasonable minimum contributions and minimum grants. Schwab Charitable is similar to Fidelity Charitable.

Vanguard Charitable has higher minimum contributions and a $500 minimum grant, which may not meet some people's giving needs.

[FelixTheCat]

Fidelity Charitable has no minimum balance to start the DAF. Charity grants have lower requirements too.

[Stinky]

You have good reasons for starting up a DAF. I’d definitely do it.

My DAF is at Fidelity. I am very satisfied with the ease of using Fidelity’s DAF.

[tuningfork]

I'm happy with Fidelity Charitable, where I've had a DAF for several years. I had some equity shares at another brokerage I wanted to use to fund the DAF. First I initiated a transfer at Fidelity to move those shares from the other brokerage into a Fidelity brokerage account. Once that was done (took a week or two as I recall), then I opened the Fidelity DAF and funded it with those shares. The shares were sold and converted to cash within the DAF, so part of setting up the DAF was to choose the funds/AA within the DAF. When I make a grant to a charity, it usually takes two or three days for Fidelity Charitable to approve it, then the charity receives either a check or an EFT if they've set that up with Fidelity Charitable.

If you want this to occur before the end of the year for 2020 tax purposes, you should probably initiate it before the end of November just to be sure the transfer and DAF funding completes in time.

Fidelity Charitable lets you setup recurring grants to charities. I haven't done this but I presume you can set it up monthly, quarterly, etc.

[Johnsson]

Fidelity

[Artsdoctor]

I have both Fidelity and Vanguard DAFs. Fidelity is better. I opened the Vanguard DAF when I had very complex donating needs and I didn't want to take the chance of screwing up specific lots going from Vanguard to Fidelity.

I have no idea what your cost basis looks like, but I would donate the most appreciated lots to your Fidelity DAF so that you can sustain your giving for several years (if it fits your needs, asset allocation, and tax situation). That way, you'll take a relatively large deduction this year and then the generous standard deduction next year. There are limitations to how much you can donate to your DAF in one year so do the math.

[RevFran]

Like artsdoctor, I have vg and Fidelity. Largely because of the lower donation threshold, I prefer fidelity and will gradually faze out my Vg DAF (even though I joked most of my assets in vg and there’s a nice ease of sending money from vg brokerage to vg DAF).

[tj]

If Tax law is going to revert to 2017 laws in 2026, I'd wait until 2026 to establish your DAF.

[dmcmahon]

I’m extremely pleased with Schwab Charitable.

[tomsense76]

If Tax law is going to revert to 2017 laws in 2026, I'd wait until 2026 to establish your DAF.

Could you please expand on this?

[tj]

If Tax law is going to revert to 2017 laws in 2026, I'd wait until 2026 to establish your DAF.

Could you please expand on this?

What is there to expand? If you don't itemize and we revert to smaller standard deductions again, then you get more value from donating when there is a smaller standard deduction as you aren't wasting the larger standard deduction.

[Stinky]

If Tax law is going to revert to 2017 laws in 2026, I'd wait until 2026 to establish your DAF.

Could you please expand on this?

What is there to expand? If you don't itemize and we revert to smaller standard deductions again, then you get more value from donating when there is a smaller standard deduction as you aren't wasting the larger standard deduction.

Standard deduction for married filing jointly was $12,700 in 2017. It is $24,800 in 2020. Difference is $12,100.

If you're in the 37% tax bracket, the difference in standard deduction is potentially worth ($12,100 X 37%), or $4,477. Of course, if you're in a lower tax bracket, your difference will be smaller.

Personally, if I was in a position to establish a DAF now, I wouldn't let the potential savings of a maximum $4,477 on the tax return I will file in early 2027 stand in the way of establishing a DAF in 2020. But that's just me.

Additionally, there's no guarantee that tax law won't change multiple times in the next six years.

I'd take a "bird in the hand" today, and establish and fund the DAF now.

[Iorek]

I agree that one should always take predictions of future tax law with a hefty serving of salt and not do things solely based on them.

I would also put in a plug for Schwab’s DAF— it has been super easy to use and I believe has the same, lower minimums as Fidelity. Also if you plan to use shares at Schwab it is much easier to set up the DAF there than to transfer the shares to another custodian first.

[chw]

Been with Fidelity Charitable for a few years- they do a great job, with a good low cost investment lineup depending on how you want the funds managed. Payment administration has been excellent so far as well. I was with Schwab previously- I found their grant process very slow (weeks at times, prompting me to call them to get the funds out).

[Pigeye Brewster]

Another Fidelity Charitable user here. I've had a very positive experience with them, both in terms of making contributions from Vanguard mutual fund account and in making distributions to designated charities.

[tomsense76]

If Tax law is going to revert to 2017 laws in 2026, I'd wait until 2026 to establish your DAF.

Could you please expand on this?

What is there to expand? If you don't itemize and we revert to smaller standard deductions again, then you get more value from donating when there is a smaller standard deduction as you aren't wasting the larger standard deduction.

Standard deduction for married filing jointly was $12,700 in 2017. It is $24,800 in 2020. Difference is $12,100.

If you're in the 37% tax bracket, the difference in standard deduction is potentially worth ($12,100 X 37%), or $4,477. Of course, if you're in a lower tax bracket, your difference will be smaller.

Personally, if I was in a position to establish a DAF now, I wouldn't let the potential savings of a maximum $4,477 on the tax return I will file in early 2027 stand in the way of establishing a DAF in 2020. But that's just me.

Additionally, there's no guarantee that tax law won't change multiple times in the next six years.

I'd take a "bird in the hand" today, and establish and fund the DAF now.

Thanks for clarifying. Thought there was something more particular in the tax code being referenced here that I was missing. Yep agree.

[tomsense76]

Thanks all for the feedback here!

[afan]

Schwab also has a DAF, quite similar to Fidelity.

Vanguard is targeting people who make large contributions to the fund and large grants. If you meet that profile, then it is fine. If you will deal in smaller numbers, the F or S funds seem equivalent to one another and better than V.

[tomsense76]

Just to update here, debated between Fidelity and Schwab. Both seem to be well suited for this purpose.

Ultimately went with Schwab as my employer uses this for ESPP & RSU shares. So this makes it a little easier to contribute those being at the same institution. Vanguard funds would need to be transferred in either case.

Went through the process of setting up the DAF. Wasn't sure if I would get done in time to use this year (am planning to start using this more significantly beginning next year as more holdings will be long-term qualified then). Though was pleased to complete this in about 15mins (the hardest part was naming the fund ). So will use the DAF to make some donations this year as well.

Thanks again all for the advice and Merry Christmas!

[Cheez-It Guy]

Using Vanguard DAF with Vanguard taxable is dead simple. Others have already pointed out the possible drawbacks with minimums. They have their reasons. I started with Fidelity DAF and rolled to Vanguard when the balance was large enough. Fidelity was fine.

[DJZ]

I too have accounts at Vanguard, Schwab and Fidelity, but chose Vanguard Charitable for my DAF because most of my assets are at V, and fees are low at VC. I’m very happy with them. Their customer service is leaps and bounds better than Vanguard itself. The $500 minimum is not an issue as I thought it might be.

Transferring assets from V to VC is a few mouse clicks, and they are transferred immediately so you know what your deduction will be exactly. Interestingly it takes a few days for them to sell the stock, say 3 days ish?, so the balance in your DAF may differ.

If you reach a certain level of assets at VC, you have access to recoverable grants, investing via CapShift (https://capshift.com/about-us/), and a few other very interesting things. I’m about do my second recoverable grant, this one with Habitat Mortgage Solutions. This allows my DAF funds to be used to expand their affordable mortgage program and get more capital to the local Habitat For Humanity affiliates. In theory these funds earn 2% per year and get the principle back into the DAF in 3 to 5 years. Here’s a blurb from their website:

Historically the primary source of capital used to fund our loans to affiliates has been classic debt. This was largely done through a program called FlexCAP, which allowed affiliates to leverage the cash flow of their future mortgage receivables. These loans are structured in accordance with the underlying mortgages used as collateral. Of the $200mm in lending, ~$195mm has been funding via term loan debt. We have received nearly $5mm in grant capital that has been used for lending. 100% of that capital has been repaid (as well as the other $195mm). Recoverable grants will better allow HMS to lend more flexible capital to affiliates, especially in the work that they are doing as non- profit housing developers. HMS places this capital amongst a network of 1,200 Habitat affiliates in all 50 states that in aggregate produce ~4,000 new homes per year.

I have heard that the other large DAF sponsors may also be partnering with CapShift, allowing recoverable grants and so forth.

This year is a particularly good year to start a DAF, with the 2017 Tax Act, CARES, and lack of Pease limitation. These provisions will probably go away at some point.

[Saving$]

I too have accounts at Vanguard, Schwab and Fidelity, but chose Vanguard Charitable for my DAF because most of my assets are at V, and fees are low at VC. I’m very happy with them. Their customer service is leaps and bounds better than Vanguard itself. The $500 minimum is not an issue as I thought it might be.

Transferring assets from V to VC is a few mouse clicks, and they are transferred immediately so you know what your deduction will be exactly. Interestingly it takes a few days for them to sell the stock, say 3 days ish?, so the balance in your DAF may differ.

If you reach a certain level of assets at VC, you have access to recoverable grants, investing via CapShift (https://capshift.com/about-us/), and a few other very interesting things. I’m about do my second recoverable grant, this one with Habitat Mortgage Solutions. This allows my DAF funds to be used to expand their affordable mortgage program and get more capital to the local Habitat For Humanity affiliates. In theory these funds earn 2% per year and get the principle back into the DAF in 3 to 5 years. Here’s a blurb from their website:

Historically the primary source of capital used to fund our loans to affiliates has been classic debt. This was largely done through a program called FlexCAP, which allowed affiliates to leverage the cash flow of their future mortgage receivables. These loans are structured in accordance with the underlying mortgages used as collateral. Of the $200mm in lending, ~$195mm has been funding via term loan debt. We have received nearly $5mm in grant capital that has been used for lending. 100% of that capital has been repaid (as well as the other $195mm). Recoverable grants will better allow HMS to lend more flexible capital to affiliates, especially in the work that they are doing as non- profit housing developers. HMS places this capital amongst a network of 1,200 Habitat affiliates in all 50 states that in aggregate produce ~4,000 new homes per year.

I have heard that the other large DAF sponsors may also be partnering with CapShift, allowing recoverable grants and so forth.

This year is a particularly good year to start a DAF, with the 2017 Tax Act, CARES, and lack of Pease limitation. These provisions will probably go away at some point.

Wow. Thanks so much for the info. This is the first advantage I have ever seen for the Vanguard DAF over the Fidelity. This is compelling.
- How much do you need in the DAF in order to be able to make grants to Habitat Mortgage Solutions?
- What is the minimum grant to Habitat Mortgage Solutions?
- Does the Fidelity DAF offer a way to make grants to Habitat Mortgage Solutions? If so, what are their minimums?

[Gadget]

I would setup a DAF at the brokerage you have most of your appreciated stocks that you want to grant. As someone who hates printing papers or doing things by snail mail, the process for donating shares has always been way easier (fully online in a couple clicks) for me when I donated shares from the same brokerage. For instance, donating shares to a Vanguard DAF was super simple for shares at Vanguard. Donating shares to a Fidelity DAF was extremely simple when the shares were at Fidelity.

My experience with Fidelity DAF and Vanguard DAF would make me prefer Fidelity DAF for ease of use and fewest limitations. But if I was set on donating Vanguard held stocks to a Fidelity DAF, I'd instead just use the Vanguard DAF to avoid having to fill out paper forms and snail mail.

For me though, the Fidelity DAF was one of the reasons that I decided to consolidate and move everything to Fidelity.

[DJZ]

I too have accounts at Vanguard, Schwab and Fidelity, but chose Vanguard Charitable for my DAF because most of my assets are at V, and fees are low at VC. I’m very happy with them. Their customer service is leaps and bounds better than Vanguard itself. The $500 minimum is not an issue as I thought it might be.

Transferring assets from V to VC is a few mouse clicks, and they are transferred immediately so you know what your deduction will be exactly. Interestingly it takes a few days for them to sell the stock, say 3 days ish?, so the balance in your DAF may differ.

If you reach a certain level of assets at VC, you have access to recoverable grants, investing via CapShift (https://capshift.com/about-us/), and a few other very interesting things. I’m about do my second recoverable grant, this one with Habitat Mortgage Solutions. This allows my DAF funds to be used to expand their affordable mortgage program and get more capital to the local Habitat For Humanity affiliates. In theory these funds earn 2% per year and get the principle back into the DAF in 3 to 5 years. Here’s a blurb from their website:

Historically the primary source of capital used to fund our loans to affiliates has been classic debt. This was largely done through a program called FlexCAP, which allowed affiliates to leverage the cash flow of their future mortgage receivables. These loans are structured in accordance with the underlying mortgages used as collateral. Of the $200mm in lending, ~$195mm has been funding via term loan debt. We have received nearly $5mm in grant capital that has been used for lending. 100% of that capital has been repaid (as well as the other $195mm). Recoverable grants will better allow HMS to lend more flexible capital to affiliates, especially in the work that they are doing as non- profit housing developers. HMS places this capital amongst a network of 1,200 Habitat affiliates in all 50 states that in aggregate produce ~4,000 new homes per year.

I have heard that the other large DAF sponsors may also be partnering with CapShift, allowing recoverable grants and so forth.

This year is a particularly good year to start a DAF, with the 2017 Tax Act, CARES, and lack of Pease limitation. These provisions will probably go away at some point.

Wow. Thanks so much for the info. This is the first advantage I have ever seen for the Vanguard DAF over the Fidelity. This is compelling.
- How much do you need in the DAF in order to be able to make grants to Habitat Mortgage Solutions?
- What is the minimum grant to Habitat Mortgage Solutions?
- Does the Fidelity DAF offer a way to make grants to Habitat Mortgage Solutions? If so, what are their minimums?

Sorry, I didn’t see this until just now.

I do believe that Fidelity Charitable is also partnering with CapShift, so recoverable grants such as those to HMS are likely to be available there as well as at VC.

Recoverable grants seem to have a minimum of $25k to $100k or so. I think they don’t want to mess with the accounting that might be involved with multiple small grants. At VC, you need $1M before you can access recoverable grants. Might be less at Fidelity.

[Artsdoctor]

https://www.vanguardcharitable.org/caps ... ble-grants

Helpful link, if you're interested.

[stan1]

Wow. Thanks so much for the info. This is the first advantage I have ever seen for the Vanguard DAF over the Fidelity. This is compelling.

I think the advantage is still with Fidelity. $500K minimum DAF at Fidelity Charitable for access to Capshift, $1M minimum DAF at Vanguard Charitable for access to Capshift.