Is a Donor Advised Fund worth it? (Strategy)

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TexMexIndex
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Is a Donor Advised Fund worth it? (Strategy)

Post by TexMexIndex » Thu Jun 21, 2018 5:39 am

I have been reading about "Donor Advised Funds"
https://www.bogleheads.org/wiki/Donor_advised_fund
and am considering opening one up with Fidelity, but am wondering if after fees and taxes it is worth it.

Of course if I choose a less tax efficient investment with bonds, or want to get a tax deduction but not choose which organization to
donate to and when yet, the DAF has a lot of perks. But I wonder if it is worth it to pay the .6% when keeping the money in a taxable account
may provide similar returns if I am just donating those funds anyway. The family makes around 100-150K depending on the year, so that is our tax range if that matters. Also I could bundle a few years of donations together to get the tax break with either the DAF or donating the mutual fund from a taxable account.

Here is my question:
1.Do I Just put money in a total stock market index fund in a non tax protected account? Benefit:
No addition .6% taken annually. Eventually I will donate portions of the fund to a 503 to get the tax advantages.
Understand some dividends will still get taxed, and that the fund isn't balanced, which I will do in my broader portfolio. Will the fees and expenses taken out make the DAF advisable over this strategy?

aristotelian
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by aristotelian » Thu Jun 21, 2018 6:28 am

If you spend the contributions to the DAF quickly, the fees will be negligible. Even if you don't, it could be years before they catch up to the double tax benefit (deduction plus free capital gains). You should do the math to figure your expected tax benefit vs the fees of your preferred DAF. The math would in part depend on your tax bracket, the amount of unrealized gains, the size of your contribution, etc.

28fe6
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by 28fe6 » Thu Jun 21, 2018 6:32 am

DAF can simplify your taxes if you donate to various places.

They key reason that I and others use a DAF is do that we can donate when it is advantageous for us, and disburse the funds when it is advantageous for any given charity. You don't get that advantage with a taxable account.

stan1
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by stan1 » Thu Jun 21, 2018 8:17 am

If you are close to 70.5 and are facing required minimum distributions from Traditional IRA/401K accounts there's a good chance under current tax law you'll be better off making qualified charitable distributions. RMDs are otherwise taxed as ordinary income.

If you are much younger a DAF may still be useful if you have highly appreciated securities or even want the convenience of being able to easily donate anonymously to charities of your choice. I do find I donate to more organizations throughout the year because it is so easy to make a grant from my DAF. Current federal tax law benefits grouping of charitable contributions with other deductible items in a single year if that gets you over the standard deduction. The DAF would let you contribute for a few years until you are ready to go over the standard deduction again. If you are well under the standard deduction every year and live in a low tax state the tax advantages of charitable donations aren't what they used to be.

Hockey10
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by Hockey10 » Thu Jun 21, 2018 8:36 am

I set up a Donor Advised Fund with Fidelity about a year ago and I have found it to be very useful. I funded the account with some stock that had significant unrealized long term capital gains. This gave me a nice tax deduction in 2017 (before the tax law changed). The process for donating to a charity is very easy, provided the charity is in the database that Fidelity uses.

I don't worry about the fees, as the benefit of unlocking the long term gains and giving them a useful home with some of my favorite charities more than makes up for the fees. I also now realize that I am more "charitable" since I opened the DAF. My contributions in the past year are definitely larger than they were previously when I was not using a DAF.

jebmke
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by jebmke » Thu Jun 21, 2018 8:48 am

stan1 wrote:
Thu Jun 21, 2018 8:17 am
If you are close to 70.5 and are facing required minimum distributions from Traditional IRA/401K accounts there's a good chance under current tax law you'll be better off making qualified charitable distributions. RMDs are otherwise taxed as ordinary income.
Yes, looking at DAFs (or any other tax related transaction) in isolation can result in sub-optimal decision making.

I loaded our DAF during a couple of years of very high tax rates to bridge the time during early retirement to 70.5. We will draw down the funds and revert to QCDs once we start RMDs
When you discover that you are riding a dead horse, the best strategy is to dismount.

Northster
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by Northster » Thu Jun 21, 2018 8:48 am

Like Hockey10 I put chunk into a DAF last year before tax law changed. A big advantage for me was the ability to donate anonymously. Before, if I donated say $300 to a charity, I was inundated with pleas to buy a charitable annuity. The fee deterred me for a time, but on balance I find it worth it.

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dm200
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by dm200 » Thu Jun 21, 2018 9:15 am

We have a Fdelity DAF and our plan is to keep it about the same balance over time - and fund annual "giving" to charities from the expected increase in the value of the investments.

We have a mix of about 59% US Equity, 29% fixed income, 9% inrternational equity abd 3% monty market

Mike Scott
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by Mike Scott » Thu Jun 21, 2018 9:28 am

There are some very extensive discussions on DAFs especially since last December (the search box will help you find them). The White Coat Investor has a really good series of pro and con blog posts on DAFs. Whether it is worth it or not to you depends on your individual circumstances and choices.

aaja
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by aaja » Thu Jun 21, 2018 10:41 am

Northster wrote:
Thu Jun 21, 2018 8:48 am
Like Hockey10 I put chunk into a DAF last year before tax law changed. A big advantage for me was the ability to donate anonymously. Before, if I donated say $300 to a charity, I was inundated with pleas to buy a charitable annuity. The fee deterred me for a time, but on balance I find it worth it.
@Hockey10 and @Northster what is the tax law change and how does it impact opening a DAF? I am planning to open one soon.

jebmke
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by jebmke » Thu Jun 21, 2018 10:42 am

^ the standard deductions were significantly increased. For many taxpayer, they will no longer benefit from itemizing deductions.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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dm200
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by dm200 » Thu Jun 21, 2018 10:44 am

aaja wrote:
Thu Jun 21, 2018 10:41 am
Northster wrote:
Thu Jun 21, 2018 8:48 am
Like Hockey10 I put chunk into a DAF last year before tax law changed. A big advantage for me was the ability to donate anonymously. Before, if I donated say $300 to a charity, I was inundated with pleas to buy a charitable annuity. The fee deterred me for a time, but on balance I find it worth it.
@Hockey10 and @Northster what is the tax law change and how does it impact opening a DAF? I am planning to open one soon.
I believe that there were impending tax changes in 2018 that provided benefits to making larger donations before the end of 2017.

As of now, I think one tax motivation could be the ability to bunch donations in one year - and have the funds flow to charities each year.

Hockey10
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by Hockey10 » Thu Jun 21, 2018 10:57 am

dm200 wrote:
Thu Jun 21, 2018 10:44 am
aaja wrote:
Thu Jun 21, 2018 10:41 am
Northster wrote:
Thu Jun 21, 2018 8:48 am
Like Hockey10 I put chunk into a DAF last year before tax law changed. A big advantage for me was the ability to donate anonymously. Before, if I donated say $300 to a charity, I was inundated with pleas to buy a charitable annuity. The fee deterred me for a time, but on balance I find it worth it.
@Hockey10 and @Northster what is the tax law change and how does it impact opening a DAF? I am planning to open one soon.
I believe that there were impending tax changes in 2018 that provided benefits to making larger donations before the end of 2017.

As of now, I think one tax motivation could be the ability to bunch donations in one year - and have the funds flow to charities each year.
The tax law change is the increase in the standard deduction which means fewer taxpayers will be itemizing deductions.

Through 2017, I always itemized deductions. My contribution to the DAF in 2017 was the single largest charitable contribution I have ever made. Now starting in 2018, I will be using the $24,000 standard deduction for married filing jointly, as the sum of all of my deductions will be lower than $24,000.

In future years, I might consider bunching deductions in a single year with another significant contribution to a DAF, but for 2018 at least, I will be using the standard deduction.

inbox788
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by inbox788 » Thu Jun 21, 2018 11:28 am

TexMexIndex wrote:
Thu Jun 21, 2018 5:39 am
1.Do I Just put money in a total stock market index fund in a non tax protected account? Benefit:
No addition .6% taken annually. Eventually I will donate portions of the fund to a 503 to get the tax advantages.
Understand some dividends will still get taxed, and that the fund isn't balanced, which I will do in my broader portfolio. Will the fees and expenses taken out make the DAF advisable over this strategy?
No, not the way you're using it. You lose 2 ways in a DAF. First off, you're paying 0.6% in fees vs. much lower fees in low cost index funds. While you get the current deduction today, eventually, you expect to grow the donation, so if you give it away after substantial growth, you should get a much higher deduction tomorrow. There are many good reasons to use a DAF, but from what I understand your situation, it isn't one of them. Go for the two in the bush.

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dm200
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by dm200 » Thu Jun 21, 2018 11:32 am

inbox788 wrote:
Thu Jun 21, 2018 11:28 am
TexMexIndex wrote:
Thu Jun 21, 2018 5:39 am
1.Do I Just put money in a total stock market index fund in a non tax protected account? Benefit:
No addition .6% taken annually. Eventually I will donate portions of the fund to a 503 to get the tax advantages.
Understand some dividends will still get taxed, and that the fund isn't balanced, which I will do in my broader portfolio. Will the fees and expenses taken out make the DAF advisable over this strategy?
No, not the way you're using it. You lose 2 ways in a DAF. First off, you're paying 0.6% in fees vs. much lower fees in low cost index funds. While you get the current deduction today, eventually, you expect to grow the donation, so if you give it away after substantial growth, you should get a much higher deduction tomorrow. There are many good reasons to use a DAF, but from what I understand your situation, it isn't one of them. Go for the two in the bush.
Yes - the DAF added fees DO have a drag.

However, depending on the mx and nature of holding yourself - there will be some increased taxes.

Another benefit to holdings in a DAF is "asset protection", since the funds are not yours any more - they cannot be taken by judgments, creditors, ex-spouses, jilted lovers, angry relatives, strangers with knives and guns, etc.

inbox788
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by inbox788 » Thu Jun 21, 2018 11:40 am

dm200 wrote:
Thu Jun 21, 2018 11:32 am
Yes - the DAF added fees DO have a drag.

However, depending on the mx and nature of holding yourself - there will be some increased taxes.

Another benefit to holdings in a DAF is "asset protection", since the funds are not yours any more - they cannot be taken by judgments, creditors, ex-spouses, jilted lovers, angry relatives, strangers with knives and guns, etc.
Good point. If I'm reading this correctly, the 2% dividends will also drag 0.3 to .48 (25% vs top tax bracket) plus 0.04 to 0.14 (VTSMX admiral vs investor shares) which compare to 0.6 DAF fees.
Total-market index 2.00% all 0.00% 0.00% 0.00% 0.30% 0.48%
https://www.bogleheads.org/wiki/Tax-eff ... _placement

Any other taxes to consider?

You could invest in Berkshire Hathaway or other non-dividend payer. Is there a low cost index fund that doesn't pay out dividends?

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dm200
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by dm200 » Thu Jun 21, 2018 1:11 pm

Any other taxes to consider?
You could invest in Berkshire Hathaway or other non-dividend payer. Is there a low cost index fund that doesn't pay out dividends?
Moving a significant amount of funds to a DAF reduces your actual assets AND annual income. Lower assets and/or lower income could help qualify for certain things (such as real estate tax deferral and/or exemption for those over 65 in my jurisdiction)

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Artsdoctor
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by Artsdoctor » Thu Jun 21, 2018 7:39 pm

OP,

Why not tell us about your philanthropy philosophy. Do you make one or two donations per year? Many? Large amounts, small amounts, in other people’s honor, in memory, etc.

First, describe your needs, and then figure out how to meet those needs.

TexMexIndex
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by TexMexIndex » Fri Jun 22, 2018 2:10 am

I give 11% net income annually to my Church annually and another 1% to other charities or needs, but only about half of that is tax deductible. In the past I've donated mutual funds ahead of time in about 1-2 year blocks. The itemizing kicking up to 24K changes thing. I think I may be less likely itemize and for now likely wouldn't prepay for multiple years.

TexMexIndex
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by TexMexIndex » Fri Jun 22, 2018 3:30 am

inbox788 wrote:
Thu Jun 21, 2018 11:40 am
dm200 wrote:
Thu Jun 21, 2018 11:32 am
Yes - the DAF added fees DO have a drag.

However, depending on the mx and nature of holding yourself - there will be some increased taxes.

Another benefit to holdings in a DAF is "asset protection", since the funds are not yours any more - they cannot be taken by judgments, creditors, ex-spouses, jilted lovers, angry relatives, strangers with knives and guns, etc.
Good point. If I'm reading this correctly, the 2% dividends will also drag 0.3 to .48 (25% vs top tax bracket) plus 0.04 to 0.14 (VTSMX admiral vs investor shares) which compare to 0.6 DAF fees.
Total-market index 2.00% all 0.00% 0.00% 0.00% 0.30% 0.48%
https://www.bogleheads.org/wiki/Tax-eff ... _placement

Any other taxes to consider?

You could invest in Berkshire Hathaway or other non-dividend payer. Is there a low cost index fund that doesn't pay out dividends?
Tell me if this math is right. Assume 1 year 8% return on 10K with a 2% dividend,
.33 for 25% bracket tax rate, .14 Mf fees:
Roughly starting plus appreciation 10,800, 15$ fees. Dividends tax and fees out of dividend return 50/200
So 10,935 after a year. If in a DAF MF fees would be 16$ and the DAF would take an additional $66 10918.
So it is really kind of a wash isn't it?

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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by Fintechnick » Fri Jun 22, 2018 10:04 am

We use a donor advised fund (from Vanguard). It has several benefits that, for me, are appealing.

1. It is very easy to make donations using appreciated securities instead of cash. Some charities are also set up to do this, but typically with more administrative work, and only for larger donations. With a DAF, it’s no problem to do this for any charity even for a $500 contribution. I have a number of positions that I established 10-12 years ago that are highly appreciate and, at this point, 95% capital gain. If I were to sell them we’d take a big haircut from taxes. The DAF allows us to work that capital gain exposure down, up to the limit of whatever we’ve budgeted for charitable contributions for the year. If we’ve budgeted $12k for donations, then instead of $12k in cash, I donate $12k in appreciated securities to the DAF and save $4k in tax exposure. I like that.

2. The DAF lets us make shifts between when we recognize a contribution for tax purposes, and when the charity actually receives funds. There have been years when we’ve wanted to pull forward the tax recognition. There have also been years when we’ve wanted to delay it (but, still ensure the charity receives a check). That flexibility is nice.

We don’t run our DAF to be a massive perpetual endowment. We run it such that it’s got about 2x years worth of planned donations, with a very conservative allocation. With that size of funding, the expense ratio hasn’t been a significant concern.

If you are not currently in a top tax bracket then this probably isn’t as compelling and the extra complexity may not be worth it.

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dm200
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by dm200 » Fri Jun 22, 2018 10:18 am

Fintechnick wrote:
Fri Jun 22, 2018 10:04 am
We use a donor advised fund (from Vanguard). It has several benefits that, for me, are appealing.
1. It is very easy to make donations using appreciated securities instead of cash. S
ome charities are also set up to do this, but typically with more administrative work, and only for larger donations. With a DAF, it’s no problem to do this for any charity even for a $500 contribution.
I have a number of positions that I established 10-12 years ago that are highly appreciate and, at this point, 95% capital gain. If I were to sell them we’d take a big haircut from taxes. The DAF allows us to work that capital gain exposure down, up to the limit of whatever we’ve budgeted for charitable contributions for the year. If we’ve budgeted $12k for donations, then instead of $12k in cash, I donate $12k in appreciated securities to the DAF and save $4k in tax exposure. I like that.
2. The DAF lets us make shifts between when we recognize a contribution for tax purposes, and when the charity actually receives funds. There have been years when we’ve wanted to pull forward the tax recognition. There have also been years when we’ve wanted to delay it (but, still ensure the charity receives a check). That flexibility is nice.
We don’t run our DAF to be a massive perpetual endowment. We run it such that it’s got about 2x years worth of planned donations, with a very conservative allocation. With that size of funding, the expense ratio hasn’t been a significant concern.
If you are not currently in a top tax bracket then this probably isn’t as compelling and the extra complexity may not be worth it.
Smaller donations of appreciated securities also run into the problem of just a few shares or partial shares.

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Artsdoctor
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by Artsdoctor » Fri Jun 22, 2018 11:09 am

TexMexIndex wrote:
Fri Jun 22, 2018 2:10 am
I give 11% net income annually to my Church annually and another 1% to other charities or needs, but only about half of that is tax deductible. In the past I've donated mutual funds ahead of time in about 1-2 year blocks. The itemizing kicking up to 24K changes thing. I think I may be less likely itemize and for now likely wouldn't prepay for multiple years.
So it appears that the vast majority of your charitable contributions goes to only one entity. You may not benefit from a DAF.

You're correct about the standard deduction changing things for a very large chunk of the population. If you feel that you won't be able to itemize, that could change your strategy.

By far, the most efficient way to give to a charity is to donate appreciated shares directly to the charity. If your church allows you to do this, then that's going to be your best bet. It is true that you won't be able to itemize the charitable contribution, but you'd be able to offload those shares with the highest gains, thereby saving capital gains tax (now and/or in the future).

Where a DAF really begins to shine is when you have multiple charities, multiple amounts (large and small), want to give anonymously, have the need to batch contributions in a specific year and more.

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dm200
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by dm200 » Fri Jun 22, 2018 12:15 pm

Artsdoctor wrote:
Fri Jun 22, 2018 11:09 am
TexMexIndex wrote:
Fri Jun 22, 2018 2:10 am
I give 11% net income annually to my Church annually and another 1% to other charities or needs, but only about half of that is tax deductible. In the past I've donated mutual funds ahead of time in about 1-2 year blocks. The itemizing kicking up to 24K changes thing. I think I may be less likely itemize and for now likely wouldn't prepay for multiple years.
So it appears that the vast majority of your charitable contributions goes to only one entity. You may not benefit from a DAF.
You're correct about the standard deduction changing things for a very large chunk of the population. If you feel that you won't be able to itemize, that could change your strategy.
By far, the most efficient way to give to a charity is to donate appreciated shares directly to the charity. If your church allows you to do this, then that's going to be your best bet. It is true that you won't be able to itemize the charitable contribution, but you'd be able to offload those shares with the highest gains, thereby saving capital gains tax (now and/or in the future).
Where a DAF really begins to shine is when you have multiple charities, multiple amounts (large and small), want to give anonymously, have the need to batch contributions in a specific year and more.
True - some churches/places of worship are well equipped to do this while (in my experience) many are not so well equipped. Many fine charities and places of worship are not, however, well able to treat a large donation in one year to fund their operation over many years. Here is one way a DAF shines - you can make a big donation to the DAF now - and spread the receipt by the destination over tome (perhaps many, many years).

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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by Artsdoctor » Fri Jun 22, 2018 1:13 pm

^ Could not agree more. If there is one specific charity, like your church, which is set up to receive donated Vanguard shares, go for it. I agree that many (most?) charities are not set up to receive those Vanguard shares directly, so a DAF allows far more flexibility.

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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by 28fe6 » Fri Jun 22, 2018 2:22 pm

Just to be clear, because I'm slightly confused on a couple points...

1) My understanding is that I can transfer-in-kind appreciated shares to my DAF, and deduct the full present NAV of those shares on my taxes in the year when they are transferred to the DAF, correct? Of course, the standard deduction being $24,000, I only realize a tax benefit if the total of all my itemized deductions for the year is over $24k. But I just want to make sure that donating appreciated shares to the DAF constitutes a deductible charitable contribution.

2) If I then advise the fund to sell those shares within the DAF and diversify into a balanced mutual fund, for example, then no capital gains tax liability is incurred, correct?

3) On the other hand if I sell the shares, I will owe capital gains tax on the proceeds. Then, when I donate the resulting remaining cash proceeds to the DAF, I can deduct that amount as well, although this is less tax-efficient because the amount I can deduct is reduced by the amount of capital gains tax I had to pay. Now for a twist: If I'm well within the 12% tax bracket, then I won't pay capital gains taxes as long as the sale does not bump me out of the 12% tax bracket (~77k MFJ), right? So in that case, it makes no difference whether I donate the appreciated shares directly, or if I sell them and donate the cash. Correct?

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dm200
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by dm200 » Fri Jun 22, 2018 3:29 pm

2) If I then advise the fund to sell those shares within the DAF and diversify into a balanced mutual fund, for example, then no capital gains tax liability is incurred, correct?
Actually, when you make the donation to the DAF - you instruct/request that the DAF choose the fund investments to use. Just one step to get into a balanced mutual fund, for example.

There are no tax consequences to you when you request a change in the investment allocation within the DAF. I do that, for example, on a regular basis.

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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by Artsdoctor » Fri Jun 22, 2018 5:26 pm

28fe6 wrote:
Fri Jun 22, 2018 2:22 pm
Just to be clear, because I'm slightly confused on a couple points...

1) My understanding is that I can transfer-in-kind appreciated shares to my DAF, and deduct the full present NAV of those shares on my taxes in the year when they are transferred to the DAF, correct? Of course, the standard deduction being $24,000, I only realize a tax benefit if the total of all my itemized deductions for the year is over $24k. But I just want to make sure that donating appreciated shares to the DAF constitutes a deductible charitable contribution.

2) If I then advise the fund to sell those shares within the DAF and diversify into a balanced mutual fund, for example, then no capital gains tax liability is incurred, correct?

3) On the other hand if I sell the shares, I will owe capital gains tax on the proceeds. Then, when I donate the resulting remaining cash proceeds to the DAF, I can deduct that amount as well, although this is less tax-efficient because the amount I can deduct is reduced by the amount of capital gains tax I had to pay. Now for a twist: If I'm well within the 12% tax bracket, then I won't pay capital gains taxes as long as the sale does not bump me out of the 12% tax bracket (~77k MFJ), right? So in that case, it makes no difference whether I donate the appreciated shares directly, or if I sell them and donate the cash. Correct?
Usually, you'd transfer over the appreciated shares to your DAF into an investment vehicle within that DAF. For example, you'd transfer over appreciated shares of your S&P 500 fund into the DAF, instructing them to take that dollar amount on the day of the transfer and put it into their Conservative Growth fund, or something. The DAF itself will have investment choices that you can choose from.

If you're not going to itemize and you're not going to pay any capital gains, then your advantage is going to be limited. If you're receiving social security, you might want to find out if those capital gains would influence how much you're taxed on your social security income (see below).

https://www.thebalance.com/taxes-on-soc ... ts-2388850

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FIREchief
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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by FIREchief » Fri Jun 22, 2018 7:20 pm

Also, don't forget to check for negative implications (from realizing the capital gains) with respect to IRMAA if you will be on Medicare within two years.

Really, the ONLY "cons" to using a DAF is coming up with the initial $5000 donation and paying the 0.6% (minimum $100) annual administration fee (all Fido numbers). Everything else is easy, convenient and makes record keeping for taxes much simpler. So many pros and just the two cons..... A person really can't go wrong with a DAF.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by dm200 » Sat Jun 23, 2018 10:25 am

FIREchief wrote:
Fri Jun 22, 2018 7:20 pm
Also, don't forget to check for negative implications (from realizing the capital gains) with respect to IRMAA if you will be on Medicare within two years.
Really, the ONLY "cons" to using a DAF is coming up with the initial $5000 donation and paying the 0.6% (minimum $100) annual administration fee (all Fido numbers). Everything else is easy, convenient and makes record keeping for taxes much simpler. So many pros and just the two cons..... A person really can't go wrong with a DAF.
We really LOVE our Fido DAF!!!!

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Re: Is a Donor Advised Fund worth it? (Strategy)

Post by Artsdoctor » Sat Jun 23, 2018 11:13 am

FIREchief wrote:
Fri Jun 22, 2018 7:20 pm
Also, don't forget to check for negative implications (from realizing the capital gains) with respect to IRMAA if you will be on Medicare within two years.

Really, the ONLY "cons" to using a DAF is coming up with the initial $5000 donation and paying the 0.6% (minimum $100) annual administration fee (all Fido numbers). Everything else is easy, convenient and makes record keeping for taxes much simpler. So many pros and just the two cons..... A person really can't go wrong with a DAF.
I agree with this sentiment. I've said this before but I have really come to view those administrative fees as just the cost of being a "philanthropist." I now view our DAFs as relatively independent entities because there are several years of potential "grants" in them. Yes, the fees are higher than what you'd pay in your personally managed account, but I've found that I actually transfer over far more assets than I used to give without a DAF, and I've expanded the organizations to which I give far more broadly because we sometimes want to give anonymously for certain things. The DAFs have their own portfolios; in years where the investments do better, we give more (and when the gains within the DAF are more meager, we give less). Once the money has been transferred over, it's really no longer in our hands. For us, it's become almost like managing a philanthropic business.

It's also become an interesting way of rebalancing. Virtually all of our equity holdings are in our taxable accounts, and with the significant bull market over the past decade, transferring over appreciated shares has been a tool we use to rebalance without incurring any capital gains taxes.

All in all, we have really come to appreciate our DAFs, and I believe we've become better philanthropists because of them.

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