Donation Strategy - Gifting Stock

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
marti038
Posts: 290
Joined: Tue Mar 21, 2017 3:45 pm
Location: Birmingham, AL

Donation Strategy - Gifting Stock

Post by marti038 »

DW and I make monthly donations based off a percentage of our income (it’s a tithe) and are considering a new strategy for how we go about it. Currently, we write a check for basically the same amount every month. Over the course of the year, our donations are such that we still itemize instead of taking the standard deduction.

Instead of writing checks monthly, we’re considering donating appreciated stock/funds/ETFs regularly (quarterly maybe) from our taxable accounts. The securities have long-term gains. We would rebuy shares in the same account with the cash we’d normally have donated. In my mind, the advantages are as follows:

1) We still get the full value of the tax deduction.
2) We avoid triggering capital gains on the appreciated shares.
3) It gives us a regular, tax-free method of rebalancing our taxable account.

Some questions I have:

1) Are any of you doing this?
2) If so, how has it gone?
3) Anything I’m overlooking?
4) The account is with Vanguard brokerage. Do any of you know if there’s a “set it and forget it” feature for gifting shares with them or will I have to manually do this regularly?
5) Any other advice you’d offer?
User avatar
Cheez-It Guy
Posts: 1721
Joined: Sun Mar 03, 2019 4:20 pm

Re: Donation Strategy - Gifting Stock

Post by Cheez-It Guy »

I do this via Vanguard Charitable Donor Advised Fund. However, for simplicity, I tend to do one annual donation to Vanguard Charitable followed by multiple disbursements (which can be scheduled / automated). Vanguard Charitable's minimums are a deterrent to some.

$25,000 minimum to open account.
$5,000 minimum additional contribution.
$500 minimum disbursement.

If this doesn't bother you, the Vanguard integration is convenient. If it does, Fidelity has lower minimums on all accounts, but you may lose some relational streamlining. It is perfectly possible to donate to Fidelity Charitable from a Vanguard Taxable account, but perhaps not all online.

I was actually planning to act on this today myself.
gogleheads.orb
Posts: 163
Joined: Fri Oct 18, 2013 12:34 pm

Re: Donation Strategy - Gifting Stock

Post by gogleheads.orb »

I do this annually with stock/ETF. I use Merrill Edge. I have found the process to be rather manual. Other than that no problems.
marti038 wrote: Mon Jun 14, 2021 10:02 am DW and I make monthly donations based off a percentage of our income (it’s a tithe) and are considering a new strategy for how we go about it. Currently, we write a check for basically the same amount every month. Over the course of the year, our donations are such that we still itemize instead of taking the standard deduction.

Instead of writing checks monthly, we’re considering donating appreciated stock/funds/ETFs regularly (quarterly maybe) from our taxable accounts. The securities have long-term gains. We would rebuy shares in the same account with the cash we’d normally have donated. In my mind, the advantages are as follows:

1) We still get the full value of the tax deduction.
2) We avoid triggering capital gains on the appreciated shares.
3) It gives us a regular, tax-free method of rebalancing our taxable account.

Some questions I have:

1) Are any of you doing this?
2) If so, how has it gone?
3) Anything I’m overlooking?
4) The account is with Vanguard brokerage. Do any of you know if there’s a “set it and forget it” feature for gifting shares with them or will I have to manually do this regularly?
5) Any other advice you’d offer?
retiredjg
Posts: 44854
Joined: Thu Jan 10, 2008 12:56 pm

Re: Donation Strategy - Gifting Stock

Post by retiredjg »

First, be sure your church is set up to accept appreciated shares. :happy

You can do what you want a couple of ways - either directly or through a "donor advised fund". Here's some information. I think (not sure) the donor advised fund might bypass the problem of a charity that finds it difficult to accept the actual securities.

https://www.bogleheads.org/wiki/Donatin ... securities

https://www.bogleheads.org/wiki/Donor_advised_fund
RadAudit
Posts: 4082
Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: Donation Strategy - Gifting Stock

Post by RadAudit »

marti038 wrote: Mon Jun 14, 2021 10:02 am 3) Anything I’m overlooking?
Have you achieved the elite status of old geezer? (70 1/2 or 72) If so, you might want to compare tax savings of QCDs vs cap gains avoidance.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
User avatar
Topic Author
marti038
Posts: 290
Joined: Tue Mar 21, 2017 3:45 pm
Location: Birmingham, AL

Re: Donation Strategy - Gifting Stock

Post by marti038 »

retiredjg wrote: Mon Jun 14, 2021 10:15 am First, be sure your church is set up to accept appreciated shares. :happy
All good in that regard. Thanks.
User avatar
Topic Author
marti038
Posts: 290
Joined: Tue Mar 21, 2017 3:45 pm
Location: Birmingham, AL

Re: Donation Strategy - Gifting Stock

Post by marti038 »

RadAudit wrote: Mon Jun 14, 2021 10:25 am
marti038 wrote: Mon Jun 14, 2021 10:02 am 3) Anything I’m overlooking?
Have you achieved the elite status of old geezer? (70 1/2 or 72) If so, you might want to compare tax savings of QCDs vs cap gains avoidance.
Nope. I'm 40, but do plan to use QCD's one day if it's still an option. Actually, this site has saved my parents and in-laws lots of dollars because I learned about QCD's here. Thank you all for that.
greenflamingo
Posts: 85
Joined: Sat Jan 26, 2019 5:29 pm

Re: Donation Strategy - Gifting Stock

Post by greenflamingo »

I use a Donor Advised Fund (through Fidelity). The additional advantage is I'm able to bunch contributions (I do every other year). So I claim the standard deduction one year, and super-load my DAF the other years. This gives additional tax advantages compared to realizing the charitable gift in a given year.

It also means I have more control around when and how the gifted stocks are transferred. My church is competent financially, but Fidelity executes the transfer the exact day I tell it to.

The one thing to watch is limits on dollars in stock you can gift to a DAF in a given year compared to your income.
cyclist
Posts: 194
Joined: Fri Jun 21, 2013 9:04 am

Re: Donation Strategy - Gifting Stock

Post by cyclist »

+1 for Fidelity Charitable

As long as your annual donations are within 30% of AGI it's a no-brainer. You get the deduction for the market value of the stock, and Fidelity sends grants to your charities per your directions. (They get cash, not shares.) It's helpful for "bunching" donations across years if needed, and it makes tax time much simpler because the only receipt you need to keep track of is the one for your donation of stock to the fund.

An added plus is that you can make donations anonymously. That may not work well for your church, but it works extremely well for us when donating to other causes that we choose to support (but from whom we need neither acknowledgement nor junk mail).

Cyclist
TN_Boy
Posts: 2308
Joined: Sat Jan 17, 2009 12:51 pm

Re: Donation Strategy - Gifting Stock

Post by TN_Boy »

retiredjg wrote: Mon Jun 14, 2021 10:15 am First, be sure your church is set up to accept appreciated shares. :happy

You can do what you want a couple of ways - either directly or through a "donor advised fund". Here's some information. I think (not sure) the donor advised fund might bypass the problem of a charity that finds it difficult to accept the actual securities.

https://www.bogleheads.org/wiki/Donatin ... securities

https://www.bogleheads.org/wiki/Donor_advised_fund
The DAF fund solves most issues with getting the money to a charity. They simply cut a check. Which can be anonymous if you wanted it to be.

I found that some larger charities can accept stock donations, it seems harder with mutual funds.

But all those concerns went away when we started using a DAF. You submit the request to send money, they verify the institution, and off the check goes, usually pretty quickly. You specify when you make the giving request how to allocate money from the investments in the DAF (all from one investment, evenly split among them, etc).
User avatar
Stinky
Posts: 8195
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Donation Strategy - Gifting Stock

Post by Stinky »

Cheez-It Guy wrote: Mon Jun 14, 2021 10:11 am I do this via Vanguard Charitable Donor Advised Fund. However, for simplicity, I tend to do one annual donation to Vanguard Charitable followed by multiple disbursements (which can be scheduled / automated). Vanguard Charitable's minimums are a deterrent to some.

$25,000 minimum to open account.
$5,000 minimum additional contribution.
$500 minimum disbursement.

If this doesn't bother you, the Vanguard integration is convenient. If it does, Fidelity has lower minimums on all accounts, but you may lose some relational streamlining. It is perfectly possible to donate to Fidelity Charitable from a Vanguard Taxable account, but perhaps not all online.

I was actually planning to act on this today myself.
I have the same setup with Fidelity Charitable. Even though all of my other funds are with Vanguard, I use Fidelity for charitable because the minimums are lower. $5k (I believe) to open, $50 minimum distribution.

I’m on a church finance committee. While we appreciate any type of donations, checks from a DAF are somewhat easier for the church to deal with than donations of stock. :D
Last edited by Stinky on Mon Jun 14, 2021 10:58 am, edited 1 time in total.
It's a GREAT day to be alive! - Travis Tritt
TN_Boy
Posts: 2308
Joined: Sat Jan 17, 2009 12:51 pm

Re: Donation Strategy - Gifting Stock

Post by TN_Boy »

greenflamingo wrote: Mon Jun 14, 2021 10:32 am I use a Donor Advised Fund (through Fidelity). The additional advantage is I'm able to bunch contributions (I do every other year). So I claim the standard deduction one year, and super-load my DAF the other years. This gives additional tax advantages compared to realizing the charitable gift in a given year.

It also means I have more control around when and how the gifted stocks are transferred. My church is competent financially, but Fidelity executes the transfer the exact day I tell it to.

The one thing to watch is limits on dollars in stock you can gift to a DAF in a given year compared to your income.
We also batch donations so that we can itemize the year we contribute to the DAF. A lot of useful tax management options with a DAF.
MrJedi
Posts: 804
Joined: Wed May 06, 2020 11:42 am

Re: Donation Strategy - Gifting Stock

Post by MrJedi »

Fidelity Charitable user here. Happy with the interface since I hold my taxable account at Fidelity. It makes gifts very easy, and you can see the exact tax lots to pick in the online interface.

Also Fidelity is running an incentive right now due to COVID where there is no minimum contribution to open a DAF account (used to be $5000 minimum).
StealthRabbit
Posts: 597
Joined: Sat Jun 13, 2009 1:25 am

Re: Donation Strategy - Gifting Stock

Post by StealthRabbit »

After many yrs and various complications of direct stock donation to charities, we opened a DAF (as a very handy tax tool and convenience). It comes with a nominal managment fee but saves a lot of time and trouble, especially if linked to your brokerage acct.

Tried a few DAF managers (including Vanguard), but eventually ended up at Fidelity, where I am very pleased. (with services, investment choices, available charities, $500 minimum donations), ... we use 'reoccurring' + individual contributions based on needs.

DAF is funded during windfall / tax appropriate yrs. Been using DAF for 25+ yrs, and it is primary to our estate planning.
Probably will spend down DAF in time for QCD's, but keep DAF active as a tool for tax planning and estate settlement.
User avatar
Topic Author
marti038
Posts: 290
Joined: Tue Mar 21, 2017 3:45 pm
Location: Birmingham, AL

Re: Donation Strategy - Gifting Stock

Post by marti038 »

Thank you all for the responses. I'm interested in learning more about some of the tax advantages and options you get with a DAF. Are there others besides bundling donations into a given tax year?
hnd
Posts: 599
Joined: Mon Jun 22, 2020 11:43 am

Re: Donation Strategy - Gifting Stock

Post by hnd »

retiredjg wrote: Mon Jun 14, 2021 10:15 am First, be sure your church is set up to accept appreciated shares. :happy
Yes definitely this. I help our treasurer and prior to my involvement we would send donated shares to a broker who we paid a commission to sell them. It was kind of a pain. Now we have the donator fill out a form and it goes to a fidelity account and once its settled, we liquidate.

We still often get paper shares too. which is a whole other ball of wax.
BrokerageZelda
Posts: 127
Joined: Sat Apr 10, 2021 10:39 am

Re: Donation Strategy - Gifting Stock

Post by BrokerageZelda »

marti038 wrote: Mon Jun 14, 2021 11:15 am Thank you all for the responses. I'm interested in learning more about some of the tax advantages and options you get with a DAF. Are there others besides bundling donations into a given tax year?
You can also choose to donate anonymously (to avoid getting on a charity's mailing list, or if the charity already knows you through personal connections or volunteering, to avoid having big donations distort that relationship). The charity receives a check from the DAF sponsoring organization with a note saying that the recommending donor wishes to remain anonymous.

DAF sponsoring organizations will usually list on your online DAF account if your charity's check has been cashed, so you won't have to worry about following up with the charity to ask if they received the money.
lazynovice
Posts: 1827
Joined: Mon Apr 16, 2012 10:48 pm

Re: Donation Strategy - Gifting Stock

Post by lazynovice »

You are really smart to be acting on this at such a young age. I thought I was doing well to just get the cash back from my credit card. I didn’t have a ton of appreciated shares, but it would have been better to go the donation route. Now that I have done it, I kick myself for not doing it earlier.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
Afty
Posts: 1717
Joined: Sun Sep 07, 2014 5:31 pm

Re: Donation Strategy - Gifting Stock

Post by Afty »

This is a good idea. In addition to increasing the efficiency of your giving, it's a great way to get out of taxable investments you no longer want without incurring capital gains. I do this via a donor advised fund, which makes it super easy.
User avatar
Stinky
Posts: 8195
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Donation Strategy - Gifting Stock

Post by Stinky »

marti038 wrote: Mon Jun 14, 2021 11:15 am Thank you all for the responses. I'm interested in learning more about some of the tax advantages and options you get with a DAF. Are there others besides bundling donations into a given tax year?
Bundling donations is potentially a big benefit to you. If you were to donate 2, 3, 4, or even more years worth of church donations at one time, you’ll come out way ahead on taxes by taking standard deduction during “non-donation years”.

Another positive is “once and done” for making stock donations instead of dribbling them in over the years.

I invested the balance inside my DAF in a total stock market fund, so I’m still taking stock market risk (and getting stock market returns). The way I figure it, the admin cost of the DAF is covered by the tax savings from not paying tax on the dividends received inside the DAF.

All in all, a DAF is a winner. And, in my view, Fidelity is best in breed.
It's a GREAT day to be alive! - Travis Tritt
shess
Posts: 1141
Joined: Wed May 17, 2017 12:02 am

Re: Donation Strategy - Gifting Stock

Post by shess »

marti038 wrote: Mon Jun 14, 2021 10:25 am
retiredjg wrote: Mon Jun 14, 2021 10:15 am First, be sure your church is set up to accept appreciated shares. :happy
All good in that regard. Thanks.
Have you looked into the actual costs? Many charities take vehicle donations, for instance. How they do this is they outsource handling to some other group which handles all of the auction and title transfer stuff. Last time we did this, by the time we were done, we felt like we would probably have left more money with the charity if we had simply done an as-is sale ourselves and donated the cash.

Likewise, in some cases charities have a sweetheart deal for handling securities, where (for instance) someone's stock-broker spouse or spouse-in-law or something gives them a cut-rate commission schedule which is still higher than most Bogleheads would ever accept. Someplace like UNICEF is going to have an in-house department handling things like asset transfers, but your neighborhood church probably has a volunteer or secretary handling donations, and in all likelihood they are more interested in offloading the special cases than in optimizing them.

This is a great benefit of a donor-advised fund. You figure out up front what you are willing to pay in costs, and the charity just receives a check. You can't get much cleaner than a check for most charities. And once your provider has cleared the charity for grants, future grants can be pretty close to one-click affairs. In fact, I actually find that over time I've become much more willing to drop $500 on some random charity I run across (like if a friend says "I love this place I volunteer at"), because it's so easy to do. For certain organizations, like our church, we have a monthly scheduled transaction, so it's completely hands-off, we just revisit our intentions once a year or so (and, obviously, if they're spinning up a special fund or something).

On the tax side, beyond batching for deductions, I also find our DAF useful for managing taxes in general. For instance, if we need some extra cash for something special, I can decide to sell some shares to fund our cash needs and schedule a donation at the same time to neutralize the sale for tax purposes.
StealthRabbit
Posts: 597
Joined: Sat Jun 13, 2009 1:25 am

Re: Donation Strategy - Gifting Stock

Post by StealthRabbit »

marti038 wrote: Mon Jun 14, 2021 11:15 am Thank you all for the responses. I'm interested in learning more about some of the tax advantages and options you get with a DAF. Are there others besides bundling donations into a given tax year?
Another benefit to gifting through DAF, is YOU can increase the agencies actual net gift (as mentioned, transaction and admin costs), especially with market volatility / knowing and following the valuation of your appreciated shares. Many times I would donate and the agency would take awhile to get and redeem shares and the market value had significantly declined in the meantime. Many times the agency would defer to me to 'time (price) -the redemption', some agencies were confused as to whether they should hold the assets as donated shares (yikes +/-, but certainly way to bothersome and risky for the purpose of most non-profits. They also have to report their holding periods, gains... too much trouble for the average volunteer treasurer... can you imagine the difficulty deciding, making the right choices with hundreds of different types of donated assets :confused .

Our DAF gets all estate proceeds upon our joint termination of life, heirs become 'subsequent grantors' / or they can liquidate as per our previously stated direction, or transfer the DAF to their own DAF's
User avatar
grabiner
Advisory Board
Posts: 30083
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Donation Strategy - Gifting Stock

Post by grabiner »

I make direct stock donations regularly to two different charities to which I make large donations. Besides avoiding capital-gains tax, this lets me get rid of funds I no longer want in my taxable account.
Wiki David Grabiner
5280Tim
Posts: 87
Joined: Wed Jul 26, 2017 9:33 pm

Re: Donation Strategy - Gifting Stock

Post by 5280Tim »

marti038 wrote: Mon Jun 14, 2021 11:15 am Thank you all for the responses. I'm interested in learning more about some of the tax advantages and options you get with a DAF. Are there others besides bundling donations into a given tax year?
I don't have much to add beyond what has already been said, but I opened a Fidelity Charitable account for the same reasons as you listed above. I have been very pleased.

You only get one tax form from Fidelity Charitable. Fidelity Charitable is itself a 501(c)(3), so they are technically the charity that you are donating to, but then you are able to recommend grants to the charities of your choosing. Our church is set up with Fidelity Charitable to accept EFTs so they don't even see checks, just money into the account.
User avatar
Cheez-It Guy
Posts: 1721
Joined: Sun Mar 03, 2019 4:20 pm

Re: Donation Strategy - Gifting Stock

Post by Cheez-It Guy »

As information, yesterday 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 this morning. All online. No paperwork and no assistance required. Completed within 5 minutes of market close.
User avatar
dodecahedron
Posts: 5699
Joined: Tue Nov 12, 2013 12:28 pm

Re: Donation Strategy - Gifting Stock

Post by dodecahedron »

marti038 wrote: Mon Jun 14, 2021 11:15 am Thank you all for the responses. I'm interested in learning more about some of the tax advantages and options you get with a DAF. Are there others besides bundling donations into a given tax year?
Greatly simplified record-keeping for tax prep and audit purposes. I give to many different charities and some are more organized than others about promptly sending out the required letter of acknowledgement.

My DAF has a well-organized electronic archive of all my donation records. When it comes to tax-filing time, I print out paper hard copies of the prior year's donation acknowledgement letters, which is typically only one or two pages, depending on how many times I gifted stock to my DAF that year. Those one or two pages go into my tax folder of hard copy documents, along with w-2s and 1099s, to be maintained for easy data entry and proofreading of my return.

If and when I am ever audited on charitable deductions, I only need to send the IRS copies of those one or two pages of DAF acknowledgement letters, not the letters from every single charity I directed grants to over the years. And if I lose my hardcopy file somehow, I can always retrieve and print out new copies.

Also, I can appoint successor advisors to my DAF (my daughters) who can take over directing donations from the funds in the event of my incapacity or demise. They will have electronic access to my entire record of giving (a list of all the organizations I have supported and amounts and dates given) which they can use to inspire or guide their own choices and they will have electronic access to my asset donation records (if they wind up having to deal with a tax audit on my behalf after I am no longer able to manage it.)
gogleheads.orb
Posts: 163
Joined: Fri Oct 18, 2013 12:34 pm

Re: Donation Strategy - Gifting Stock

Post by gogleheads.orb »

So I ended up doing this with two charities yesterday. It was easier than expected. Merrill Edge has an online form now. The charities received the shares yesterday evening and sold them this morning. It is also possible to bunch your donations by gifting shares. If the finances of your church are strong enough you could give two years of donations all at one time.
User avatar
Topic Author
marti038
Posts: 290
Joined: Tue Mar 21, 2017 3:45 pm
Location: Birmingham, AL

Re: Donation Strategy - Gifting Stock

Post by marti038 »

Thanks again to all of you for the information. It has been very helpful.

DW and I are going to proceed with the plan, but can't frontload 2-3 years of donations in a DAF at the moment. We'll have to work up to that. In the meantime we'll begin donating stock quarterly directly from the brokerage account and rebuy securities with the cash we were donating before.

For those of you who were curious, the church I attend has a clearing account with a bank that sells the shares on their behalf and deposits the proceeds into their account. I agree that a DAF would be more efficient and plan to open one once the tax efficiency and cash flow stars align.
User avatar
Cheez-It Guy
Posts: 1721
Joined: Sun Mar 03, 2019 4:20 pm

Re: Donation Strategy - Gifting Stock

Post by Cheez-It Guy »

Donor Advised Funds have a lot of benefits, but they do have AUM fees assessed annually, so if you and your receiving organization can relatively easily coordinate direct giving of shares, you have no money lost to fees.
Grateful4321
Posts: 5
Joined: Sun Nov 17, 2019 12:38 pm

Re: Donation Strategy - Gifting Stock

Post by Grateful4321 »

When I looked into this years ago, due to the AUM, I concluded I would simply batch giving and do it every other year. I just told the charities I give to that they should account for my giving in their budget this way (if it's a small organization).

What is the best combo of AUM / service you have found?
User avatar
Cheez-It Guy
Posts: 1721
Joined: Sun Mar 03, 2019 4:20 pm

Re: Donation Strategy - Gifting Stock

Post by Cheez-It Guy »

Vanguard, Fidelity, and Schwab are all at 0.60% AUM for basic accounts. If you keep a lot there, they offer some relief for larger balances, but it's progressive. It's somewhat helpful to use the same flavor of DAF as you do for your taxable brokerage, but this isn't required. Vanguard has the highest minimums among the big 3.
User avatar
Topic Author
marti038
Posts: 290
Joined: Tue Mar 21, 2017 3:45 pm
Location: Birmingham, AL

Re: Donation Strategy - Gifting Stock

Post by marti038 »

marti038 wrote: Tue Jun 15, 2021 10:42 am Thanks again to all of you for the information. It has been very helpful.

DW and I are going to proceed with the plan, but can't frontload 2-3 years of donations in a DAF at the moment. We'll have to work up to that. In the meantime we'll begin donating stock quarterly directly from the brokerage account and rebuy securities with the cash we were donating before.

For those of you who were curious, the church I attend has a clearing account with a bank that sells the shares on their behalf and deposits the proceeds into their account. I agree that a DAF would be more efficient and plan to open one once the tax efficiency and cash flow stars align.
We recently finished our first donation through our Vanguard taxable account. Smooth as silk.

Thank you all for your input. It feels really good to being making the donation while simultaneously avoiding capital gains taxes and enjoying a stepped up basis. We do plan on using the DAF method in the future; probably during a windfall year.
Post Reply