DAF for church offering? [Donor Advised Fund]

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
gregwils
Posts: 39
Joined: Mon Oct 03, 2016 12:17 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by gregwils » Sat Jul 27, 2019 7:19 am

"'annual PERSONAL commitment' from DAF, as per DAF restrictions."

Thanks for pointing this out. I was unaware of IRS rulings in this area, however, I don't believe I would have a conflict as my church does not use 'pledges'.

I am six years away from my planned retirement at my 68th birthday. My intent is to fund a DAF now, then use the DAF funds to support my church between the ages of 68 and 70 when I hope to convert as much as I can to Roth accounts. I have adequate funds in taxable accounts to support myself during those years. I will have some RMD pain in future years, so will give to directly to my church from those tax-deferred accounts and could continue to put some funds in a DAF to reduce my tax burden if it make sense.

I am not a high net worth person, but have a fair amount in tax deferred accounts, mostly attributable to an ESOP that has outperformed.

Does my strategy sound reasonable or am I missing anything?

User avatar
dm200
Posts: 22405
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: DAF for church offering? [Donor Advised Fund]

Post by dm200 » Sat Jul 27, 2019 1:38 pm

stlutz wrote:
Fri Jul 26, 2019 5:23 pm
As somebody who has been a church treasurer, yes, you love even giving throughout the year. But that's overall, not for individuals. In general, summer is a problem--giving always goes down then but the expenses don't. If you are looking for a way to give once a year that your church will like, do that annual gift in the middle of the summer (today?)--it will actually make your church treasurer happy. :happy
Not about DAF, but when our religious organization offered regular, electronic giving - the amount donated went up AND the slow summer donations move up. Win - win. The previous Pastor had refused to even consider electronic giving, but it was started almost immediately by his successor.

StealthRabbit
Posts: 452
Joined: Sat Jun 13, 2009 1:25 am

Re: DAF for church offering? [Donor Advised Fund]

Post by StealthRabbit » Sat Jul 27, 2019 1:55 pm

gregwils wrote:
Sat Jul 27, 2019 7:19 am
"'annual PERSONAL commitment' from DAF, as per DAF restrictions."

Thanks for pointing this out. I was unaware of IRS rulings in this area, however, I don't believe I would have a conflict as my church does not use 'pledges'.

I am six years away from my planned retirement at my 68th birthday. My intent is to fund a DAF now, then use the DAF funds to support my church between the ages of 68 and 70 when I hope to convert as much as I can to Roth accounts....

I am not a high net worth person, but have a fair amount in tax deferred accounts, mostly attributable to an ESOP that has outperformed.

Does my strategy sound reasonable or am I missing anything?
Makes sense for your financial situation, and is a good use of DAF.
Just refrain for using the words; "Pledge", "Annual commitment", "Obligation" ...in your grant request.

I set my DAF up in my 30's using appreciated company stock with the intent to perpetually fund charities (through 50+ yrs of retirement). The DAF has been a very useful tax tool, tho 0.6% annual fee is not cheap (but worth it for the trouble / services provided).


Why delay Roth conversions age 68 - 70? (Just curious, I may need some education :wink: ). I plan to step up my Roth conversions the minute I am off ACA subsidy (Age 65, mid yr).
I do not have high net worth, so will not be converting enough to trigger increase in Medicare, or reduction in SS benefit. (I only convert when staying under 12% Effective Fed tax). My RMD's will turn into QCD's if needed. I will continue Roth conversions after age 70 if deemed necessary.

User avatar
dm200
Posts: 22405
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: DAF for church offering? [Donor Advised Fund]

Post by dm200 » Sat Jul 27, 2019 1:58 pm

A DAF is the ultimate in "asset protection" , since the funds are no longer "yours" - but you retain the rights to request grants to your selected chariities.

User avatar
ChowYunPhat
Posts: 224
Joined: Mon Jun 02, 2014 7:49 pm
Location: Texas

Re: DAF for church offering? [Donor Advised Fund]

Post by ChowYunPhat » Sat Jul 27, 2019 2:05 pm

Use our Fidelity DAF to give to charity and religious orgs. Its the same as writing a check from standpoint of the 501c3. Works great, easy to do, excellent tax benefit (esp for higher earners). Highly recommend.

Some employers will match to DAF but it's rare. Many portal services that help with Corp giving are themselves DAFs although for fee reasons they're not great for your personal financial giving.
A wise man and his money are friends forever...

Bfwolf
Posts: 1962
Joined: Thu Oct 14, 2010 11:19 am

Re: DAF for church offering?

Post by Bfwolf » Sat Jul 27, 2019 6:02 pm

leonard wrote:
Mon Dec 26, 2016 5:45 pm
duckcalldan wrote:
leonard wrote:Why not just do a single donation a year and let the church manage the monthly budgeting out of the cash flow?

Way less admin for you.
Most folks donate to their church 52 times a year via the offering plate. I have EFT transfers twice a month. Churches depend on regular offerings, supplemented by one-off donations (especially at years end). Regular offerings are also a discipline; a consistent reminder that all that we have is ultimately His. Monthly donations seem like a good compromise, and doesn't require much more admin on my part.
Ok, but sometimes a break from tradition makes us more efficient.

I'd personally leave it to the church to divide by 12 and manage their own budget and make it much easier on myself. They get the same amount - just happens to come all at once. Also, the church incurs a slightly smaller amount of overhead managing one Xfer per year - versus 12 (or 52 or whatever). Plus, having the amount up front - eliminates risk in financial planning for them.

Also, this might allow you to manage the timing of donations for tax purposes in particular years.

Anyway, seems to me there is some upside to my suggestion - but then I don't have a horse in it.
I also find the use of DAFs puzzling. They add complexity and cost, and the charity would rather have all the money now than receive it over time. I've only been able to come up with 3 reasons for using them:

1) The giver wants the tax deduction now but hasn't decided which charities to give to, or in which proportions. So the DAF gives her time to figure that out.

2) It makes the giver feel better to give a smaller amount multiple times rather than a big amount once. This is just a matter of personal preference, even if it is a bit more costly, complex, and inefficient.

3) The money being given is quite substantial, more than the charity could reasonably spend in a short amount of time. The giver feels like she can manage the money better than the charity can in the meantime. This may be a bit of hubris given the fees involved, although it wouldn't surprise me to see a Boglehead portfolio managed significantly better than a small charity's portfolio.

gregwils
Posts: 39
Joined: Mon Oct 03, 2016 12:17 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by gregwils » Sat Jul 27, 2019 6:11 pm

StealthRabbit wrote:
Sat Jul 27, 2019 1:55 pm

Why delay Roth conversions age 68 - 70? (Just curious, I may need some education :wink: ).
68-70 is my window of no earnings and pre-RMD, so I can convert while living off taxable accounts and only have some LT capital gains from the taxable accounts. Converting accounts to Roth now would add the converted amount to my current income, and would be costly.

gregwils
Posts: 39
Joined: Mon Oct 03, 2016 12:17 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by gregwils » Sat Jul 27, 2019 6:16 pm

"1) The giver wants the tax deduction now but hasn't decided which charities to give to, or in which proportions. So the DAF gives her time to figure that out."

1) The giver wants the benefit of tax deduction now during higher income years and gift the money at a later date as when their income is reduced.

Splitting the tax deduction year and gift year offers a lot of flexibility to gifting.

User avatar
FIREchief
Posts: 3668
Joined: Fri Aug 19, 2016 6:40 pm

Re: DAF for church offering?

Post by FIREchief » Sat Jul 27, 2019 10:35 pm

Bfwolf wrote:
Sat Jul 27, 2019 6:02 pm
I also find the use of DAFs puzzling. They add complexity and cost, and the charity would rather have all the money now than receive it over time. I've only been able to come up with 3 reasons for using them:

1) The giver wants the tax deduction now but hasn't decided which charities to give to, or in which proportions. So the DAF gives her time to figure that out.

2) It makes the giver feel better to give a smaller amount multiple times rather than a big amount once. This is just a matter of personal preference, even if it is a bit more costly, complex, and inefficient.

3) The money being given is quite substantial, more than the charity could reasonably spend in a short amount of time. The giver feels like she can manage the money better than the charity can in the meantime. This may be a bit of hubris given the fees involved, although it wouldn't surprise me to see a Boglehead portfolio managed significantly better than a small charity's portfolio.
4) The giver wants to support one or more charitable causes on an ongoing basis and the DAF allows them to do this in a more efficient manner (cost/effort/complexity/etc.).

If you aren't such a person (and I have no idea), then I can understand that this might be puzzling; but I'm guessing that several on the forum would fall into this category.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Bfwolf
Posts: 1962
Joined: Thu Oct 14, 2010 11:19 am

Re: DAF for church offering? [Donor Advised Fund]

Post by Bfwolf » Sat Jul 27, 2019 11:14 pm

gregwils wrote:
Sat Jul 27, 2019 6:16 pm
"1) The giver wants the tax deduction now but hasn't decided which charities to give to, or in which proportions. So the DAF gives her time to figure that out."

1) The giver wants the benefit of tax deduction now during higher income years and gift the money at a later date as when their income is reduced.

Splitting the tax deduction year and gift year offers a lot of flexibility to gifting.
This seems to me to be a subset of 1, 2 or 3. The underlying question is: if they want to get the tax deduction now, but don't want to give the money now: WHY? Your explanation does not address this.

Bfwolf
Posts: 1962
Joined: Thu Oct 14, 2010 11:19 am

Re: DAF for church offering?

Post by Bfwolf » Sat Jul 27, 2019 11:16 pm

FIREchief wrote:
Sat Jul 27, 2019 10:35 pm
Bfwolf wrote:
Sat Jul 27, 2019 6:02 pm
I also find the use of DAFs puzzling. They add complexity and cost, and the charity would rather have all the money now than receive it over time. I've only been able to come up with 3 reasons for using them:

1) The giver wants the tax deduction now but hasn't decided which charities to give to, or in which proportions. So the DAF gives her time to figure that out.

2) It makes the giver feel better to give a smaller amount multiple times rather than a big amount once. This is just a matter of personal preference, even if it is a bit more costly, complex, and inefficient.

3) The money being given is quite substantial, more than the charity could reasonably spend in a short amount of time. The giver feels like she can manage the money better than the charity can in the meantime. This may be a bit of hubris given the fees involved, although it wouldn't surprise me to see a Boglehead portfolio managed significantly better than a small charity's portfolio.
4) The giver wants to support one or more charitable causes on an ongoing basis and the DAF allows them to do this in a more efficient manner (cost/effort/complexity/etc.).

If you aren't such a person (and I have no idea), then I can understand that this might be puzzling; but I'm guessing that several on the forum would fall into this category.
I'm not sure how 4 is distinct from 2.

User avatar
FIREchief
Posts: 3668
Joined: Fri Aug 19, 2016 6:40 pm

Re: DAF for church offering?

Post by FIREchief » Sat Jul 27, 2019 11:39 pm

Bfwolf wrote:
Sat Jul 27, 2019 11:16 pm
FIREchief wrote:
Sat Jul 27, 2019 10:35 pm
Bfwolf wrote:
Sat Jul 27, 2019 6:02 pm
I also find the use of DAFs puzzling. They add complexity and cost, and the charity would rather have all the money now than receive it over time. I've only been able to come up with 3 reasons for using them:

1) The giver wants the tax deduction now but hasn't decided which charities to give to, or in which proportions. So the DAF gives her time to figure that out.

2) It makes the giver feel better to give a smaller amount multiple times rather than a big amount once. This is just a matter of personal preference, even if it is a bit more costly, complex, and inefficient.

3) The money being given is quite substantial, more than the charity could reasonably spend in a short amount of time. The giver feels like she can manage the money better than the charity can in the meantime. This may be a bit of hubris given the fees involved, although it wouldn't surprise me to see a Boglehead portfolio managed significantly better than a small charity's portfolio.
4) The giver wants to support one or more charitable causes on an ongoing basis and the DAF allows them to do this in a more efficient manner (cost/effort/complexity/etc.).

If you aren't such a person (and I have no idea), then I can understand that this might be puzzling; but I'm guessing that several on the forum would fall into this category.
I'm not sure how 4 is distinct from 2.
Your two is about "feeling better." My four is about a commitment to ongoing support of one or more worthy causes. This will not be understood through accounting logic.

Let's say I want to save the whales. I can give $10,000 immediately to "WhalesVision," and they will likely spend it all during 2019. They may actually save a whale. They may buy TV time and hold a pledge drive. They may pay protestors to stand outside of Sea World. Whatever happens, my desire to help the whales coming of age during 2020 will likely be unsupported. I can also give $1000 immediately to "WhalesVision" and then next year decide to give $1000 to "WarmWhales," because they saved twice as many whales per dollar than "WhalesVision" did during 2019. And on and on it goes for ten years. Of course, as your "1" suggests, I may even decide after five years that with our now burgeoning Whale populations, they're eating too many seals. Maybe in year six I decide to support saving the seals. Some may equate this to good stewardship. Others will likely have other names for it. My point is, it should have little to do with "feelings." All the DAF contributor needs to decide in year one is that they would rather have some of their hard earned money help something other than their own FIREFUND. Does that make more sense?

(If you just want to feel better, a bottle of 12 year old Scotch might provide higher ROI than 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.

Bfwolf
Posts: 1962
Joined: Thu Oct 14, 2010 11:19 am

Re: DAF for church offering?

Post by Bfwolf » Sun Jul 28, 2019 12:15 am

FIREchief wrote:
Sat Jul 27, 2019 11:39 pm
Bfwolf wrote:
Sat Jul 27, 2019 11:16 pm
FIREchief wrote:
Sat Jul 27, 2019 10:35 pm
Bfwolf wrote:
Sat Jul 27, 2019 6:02 pm
I also find the use of DAFs puzzling. They add complexity and cost, and the charity would rather have all the money now than receive it over time. I've only been able to come up with 3 reasons for using them:

1) The giver wants the tax deduction now but hasn't decided which charities to give to, or in which proportions. So the DAF gives her time to figure that out.

2) It makes the giver feel better to give a smaller amount multiple times rather than a big amount once. This is just a matter of personal preference, even if it is a bit more costly, complex, and inefficient.

3) The money being given is quite substantial, more than the charity could reasonably spend in a short amount of time. The giver feels like she can manage the money better than the charity can in the meantime. This may be a bit of hubris given the fees involved, although it wouldn't surprise me to see a Boglehead portfolio managed significantly better than a small charity's portfolio.
4) The giver wants to support one or more charitable causes on an ongoing basis and the DAF allows them to do this in a more efficient manner (cost/effort/complexity/etc.).

If you aren't such a person (and I have no idea), then I can understand that this might be puzzling; but I'm guessing that several on the forum would fall into this category.
I'm not sure how 4 is distinct from 2.
Your two is about "feeling better." My four is about a commitment to ongoing support of one or more worthy causes. This will not be understood through accounting logic.

Let's say I want to save the whales. I can give $10,000 immediately to "WhalesVision," and they will likely spend it all during 2019. They may actually save a whale. They may buy TV time and hold a pledge drive. They may pay protestors to stand outside of Sea World. Whatever happens, my desire to help the whales coming of age during 2020 will likely be unsupported. I can also give $1000 immediately to "WhalesVision" and then next year decide to give $1000 to "WarmWhales," because they saved twice as many whales per dollar than "WhalesVision" did during 2019. And on and on it goes for ten years. Of course, as your "1" suggests, I may even decide after five years that with our now burgeoning Whale populations, they're eating too many seals. Maybe in year six I decide to support saving the seals. Some may equate this to good stewardship. Others will likely have other names for it. My point is, it should have little to do with "feelings." All the DAF contributor needs to decide in year one is that they would rather have some of their hard earned money help something other than their own FIREFUND. Does that make more sense?

(If you just want to feel better, a bottle of 12 year old Scotch might provide higher ROI than a DAF)
Yes, that explanation helps, thank you. I think the desire to potentially change where the money goes is a subset of 1, but this desire for ongoing support is something a bit different. I'm not sure exactly how to categorize it. But I do think there's an element of selfishness and feelings to it. I think donors may "trick" themselves into thinking this allows them to be a good steward of the money, but the reality is that they get a dopamine rush every time they distribute some money, so it makes them feel better to do it over time rather than just give their charity/charities the money up front.

The reality is that all of our donations are just a drop in the bucket of the total donations a charity receives. I think it's pretty much a mental mind game to think you are doing more good by distributing $5K a year over 10 years rather than $50K upfront.

I think if you asked the charity, they'd rather have the $50K now than a promise of 5K a year for 10 years.

I hope this doesn't come across as condescending toward people who are giving to charity, which is a truly noble cause. But I think people should be honest with themselves. If you're donating huge sums of money, it's one thing....you can affect charity policy with your donations and you want to avoid over-donating to a charity such that they have more money than they have good spending opportunities for. For the rest of us regular Joes, I'm just not sure this "I want to be donating on an ongoing basis" is really about the charity's best interest but rather about the good feelings ongoing donations give us.

EDIT: I suspect some people who utilize DAFs will have strong feelings about this and be upset at my characterizations. I apologize if I took a positive thread and turned it negative.

User avatar
FIREchief
Posts: 3668
Joined: Fri Aug 19, 2016 6:40 pm

Re: DAF for church offering?

Post by FIREchief » Sun Jul 28, 2019 2:33 am

Bfwolf wrote:
Sun Jul 28, 2019 12:15 am
But I do think there's an element of selfishness and feelings to it. I think donors may "trick" themselves into thinking this allows them to be a good steward of the money, but the reality is that they get a dopamine rush every time they distribute some money, so it makes them feel better to do it over time rather than just give their charity/charities the money up front.
Reality?? What makes you the judge of the motives of these anonymous people you encounter over the internet? Dopamine rush?? For many, charitable giving is a humbling experience (unless they give 100%, but again there is likely still more that they could have done).
The reality is that all of our donations are just a drop in the bucket of the total donations a charity receives. I think it's pretty much a mental mind game to think you are doing more good by distributing $5K a year over 10 years rather than $50K upfront.
Sure, the poor will always be with us. Your point?
I hope this doesn't come across as condescending toward people who are giving to charity, which is a truly noble cause.
Does this mean you're retracting that "dopamine" comment?
But I think people should be honest with themselves. If you're donating huge sums of money, it's one thing....you can affect charity policy with your donations and you want to avoid over-donating to a charity such that they have more money than they have good spending opportunities for. For the rest of us regular Joes, I'm just not sure this "I want to be donating on an ongoing basis" is really about the charity's best interest but rather about the good feelings ongoing donations give us.
Define "huge sums of money." Again with the "good feelings"..... Do you really know these regular Joes who you continue to insult regarding their charitable activities?
EDIT: I suspect some people who utilize DAFs will have strong feelings about this and be upset at my characterizations.
Upset? Maybe. I'm guessing that there will be other emotions.....

ETA: if somebody gets a "dopamine rush" from a charitable donation, then it isn't really charity. They've already received their reward.
Last edited by FIREchief on Sun Jul 28, 2019 8:17 am, edited 2 times in total.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

StealthRabbit
Posts: 452
Joined: Sat Jun 13, 2009 1:25 am

Re: DAF for church offering? [Donor Advised Fund]

Post by StealthRabbit » Sun Jul 28, 2019 2:56 am

...the reality is that they get a dopamine rush every time they distribute some money,...
or, just imagine someone has had 'giving' as a lifestyle for generations.. Yes, this is possible and in-fact a reality in many families (thank goodness).
1) They want to enable perpetual gifting BEYOND their life (no warm fuzzies for them when they are GONE and likely of no importance while they are living)
2) Enable a legacy for their kids / employees to follow (as Subsequent donees / gift recommendations)
3) Allow varied recipients to benefit for decades (including those who are not yet know or in need at time of funding DAF)
4) GROW a gifting fund over decades!!! (actually a primary reason for us starting a DAF). 'Self managed' can grow (income tax free) at market rates far exceeding annual gifting of ~10%.


I have no clue what my DAF might be enabling in the future, vs what I could have DUMPED all my contribution into 30 yrs ago, (once gone that would have been spent... not necessarily 'invested'.) That could have been very poorly used (as can the future), but even for my 'small gifting' ~$10 - $20k / yr it is great for my family and successors to be able to designate to relevant causes (there are plenty).

I have been a 'systematic' gifter since long before employment/ need for 'deductions'. It is just a way of life for our family to give more than we spend on ourselves. A DAF was terrific way to 'balance' my AA when company stock was soaring for 30+ yrs, + set up a future of gifting to causes far greater than were known Day One of my DAF inception.

YMMV, we all do life differently (thank goodness).

I thank my lucky stars I had great predecessors (family history of giving / sharing) , and a great benevolent employer (by example and practice.) Yes, they could donate to build Children's Hospitals and fund extensive research, which I can only participate at a micro level, BUT I trust my trickles are changing lives (and I am certain of that from seeing and living the results), far more than I myself could do.

Wow, and to think we actual get a tax benefit from DAF (icing, but not a primary purpose / quest)
Tax savings = more dough to distribute! :sharebeer

User avatar
snackdog
Posts: 804
Joined: Wed Nov 12, 2014 4:57 am

Re: DAF for church offering?

Post by snackdog » Sun Jul 28, 2019 7:55 am

FIREchief wrote:
Sat Jul 27, 2019 10:35 pm
Bfwolf wrote:
Sat Jul 27, 2019 6:02 pm
I also find the use of DAFs puzzling. They add complexity and cost, and the charity would rather have all the money now than receive it over time. I've only been able to come up with 3 reasons for using them:

1) The giver wants the tax deduction now but hasn't decided which charities to give to, or in which proportions. So the DAF gives her time to figure that out.

2) It makes the giver feel better to give a smaller amount multiple times rather than a big amount once. This is just a matter of personal preference, even if it is a bit more costly, complex, and inefficient.

3) The money being given is quite substantial, more than the charity could reasonably spend in a short amount of time. The giver feels like she can manage the money better than the charity can in the meantime. This may be a bit of hubris given the fees involved, although it wouldn't surprise me to see a Boglehead portfolio managed significantly better than a small charity's portfolio.
4) The giver wants to support one or more charitable causes on an ongoing basis and the DAF allows them to do this in a more efficient manner (cost/effort/complexity/etc.).

If you aren't such a person (and I have no idea), then I can understand that this might be puzzling; but I'm guessing that several on the forum would fall into this category.
5) Giver has a current high income and wishes to max the tax savings possible from funding a DAF (around 1/6 of income) because near future retirement years will have low income and low ability to gain tax savings from donations.

Example, Madge earns $300,000 per year and donates $10,000 annually to a charity. She will retire in two years and live off post-tax savings for 10 years, spending $150,000 annually, while converting funds to Roth up until her preferred ACA income limit, paying 20% cap gains taxes of maybe $10,000/yr. She will use the standard deductions and get no tax benefit from her annual donations. However, if she sets up a DAF now and donates $50,000/yr of stock while still working she will get a significant tax savings each year. She will then pay the charity $10K/yr for 10 years out of the DAF, or much longer if the DAF appreciates in value.

User avatar
ChowYunPhat
Posts: 224
Joined: Mon Jun 02, 2014 7:49 pm
Location: Texas

Re: DAF for church offering? [Donor Advised Fund]

Post by ChowYunPhat » Sun Jul 28, 2019 8:51 am

I think most people on this thread are missing the point. Have you ever tried to gift a share of stock to a dog rescue? I have...it's a giant pain in the butt and most charities (including so-called sophisticated charities) are not equipped with a brokerage account to liquidate gifts of securities. The DAF facilitates this. Even if they had the capability to receive securities, the DAF streamlines this process.

The DAF also serves to vet 501C3 paperwork which can help take the guesswork out of donating to less established organizations.

For the giver to obtain the tax benefit of capital gains relief and the charitable donation (from the DAF, not your ultimate charity) is the primary concern. The giver also has every incentive to move money out of the DAF rather quickly as the fees make this an uncompetitive vehicle vs. traditional investment accounts through VG or FIDO.
A wise man and his money are friends forever...

User avatar
dm200
Posts: 22405
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: DAF for church offering? [Donor Advised Fund]

Post by dm200 » Sun Jul 28, 2019 6:52 pm

ChowYunPhat wrote:
Sun Jul 28, 2019 8:51 am
I think most people on this thread are missing the point. Have you ever tried to gift a share of stock to a dog rescue? I have...it's a giant pain in the butt and most charities (including so-called sophisticated charities) are not equipped with a brokerage account to liquidate gifts of securities. The DAF facilitates this. Even if they had the capability to receive securities, the DAF streamlines this process.
The DAF also serves to vet 501C3 paperwork which can help take the guesswork out of donating to less established organizations.
For the giver to obtain the tax benefit of capital gains relief and the charitable donation (from the DAF, not your ultimate charity) is the primary concern. The giver also has every incentive to move money out of the DAF rather quickly as the fees make this an uncompetitive vehicle vs. traditional investment accounts through VG or FIDO.
Yes ... It has been many years, but I also had a mess when donating appreciated stock to a religious entity. Using a DAF completely solves any such actual or potential problem. The target charity also does not need to spend any money to sell such stock.

silvercertificate
Posts: 39
Joined: Sat Dec 10, 2016 8:13 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by silvercertificate » Sun Jul 28, 2019 9:08 pm

We use a DAF to bunch deductions and then give the money away to multiple charities over time. It works great even at our small church that has some administrative challenges with direct stock donations. I use Fidelity Charitable, it was a little less expensive than Vanguard when I set up my account. I don’t love the fee, but the convenience and flexibility are excellent!

tnr
Posts: 76
Joined: Tue Jan 26, 2016 12:36 pm

Re: DAF for church offering?

Post by tnr » Sun Jul 28, 2019 10:15 pm

snackdog wrote:
Sun Jul 28, 2019 7:55 am
FIREchief wrote:
Sat Jul 27, 2019 10:35 pm
Bfwolf wrote:
Sat Jul 27, 2019 6:02 pm
I also find the use of DAFs puzzling. They add complexity and cost, and the charity would rather have all the money now than receive it over time. I've only been able to come up with 3 reasons for using them:

1) The giver wants the tax deduction now but hasn't decided which charities to give to, or in which proportions. So the DAF gives her time to figure that out.

2) It makes the giver feel better to give a smaller amount multiple times rather than a big amount once. This is just a matter of personal preference, even if it is a bit more costly, complex, and inefficient.

3) The money being given is quite substantial, more than the charity could reasonably spend in a short amount of time. The giver feels like she can manage the money better than the charity can in the meantime. This may be a bit of hubris given the fees involved, although it wouldn't surprise me to see a Boglehead portfolio managed significantly better than a small charity's portfolio.
4) The giver wants to support one or more charitable causes on an ongoing basis and the DAF allows them to do this in a more efficient manner (cost/effort/complexity/etc.).

If you aren't such a person (and I have no idea), then I can understand that this might be puzzling; but I'm guessing that several on the forum would fall into this category.
5) Giver has a current high income and wishes to max the tax savings possible from funding a DAF (around 1/6 of income) because near future retirement years will have low income and low ability to gain tax savings from donations.

Example, Madge earns $300,000 per year and donates $10,000 annually to a charity. She will retire in two years and live off post-tax savings for 10 years, spending $150,000 annually, while converting funds to Roth up until her preferred ACA income limit, paying 20% cap gains taxes of maybe $10,000/yr. She will use the standard deductions and get no tax benefit from her annual donations. However, if she sets up a DAF now and donates $50,000/yr of stock while still working she will get a significant tax savings each year. She will then pay the charity $10K/yr for 10 years out of the DAF, or much longer if the DAF appreciates in value.
Thank you for explaining this. The numbers are different but this is my primary reason for setting up a DAF. Much higher earnings in my last year’s prior to retirement followed by lower retirement income.

User avatar
dm200
Posts: 22405
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: DAF for church offering? [Donor Advised Fund]

Post by dm200 » Mon Jul 29, 2019 8:20 am

dm200 wrote:
Sun Jul 28, 2019 6:52 pm
ChowYunPhat wrote:
Sun Jul 28, 2019 8:51 am
I think most people on this thread are missing the point. Have you ever tried to gift a share of stock to a dog rescue? I have...it's a giant pain in the butt and most charities (including so-called sophisticated charities) are not equipped with a brokerage account to liquidate gifts of securities. The DAF facilitates this. Even if they had the capability to receive securities, the DAF streamlines this process.
The DAF also serves to vet 501C3 paperwork which can help take the guesswork out of donating to less established organizations.
For the giver to obtain the tax benefit of capital gains relief and the charitable donation (from the DAF, not your ultimate charity) is the primary concern. The giver also has every incentive to move money out of the DAF rather quickly as the fees make this an uncompetitive vehicle vs. traditional investment accounts through VG or FIDO.
Yes ... It has been many years, but I also had a mess when donating appreciated stock to a religious entity. Using a DAF completely solves any such actual or potential problem. The target charity also does not need to spend any money to sell such stock.
Just to elaborate ...

This was a Capital Campaign and "pledges" were requested. So, I "pledged" the current value of five shares of stock and donated those five shares. The recipient religious institution didn't do anything for a while with the shares, and fumbled around. They finally sold the shares. In the meantime, the price of that stock went down - and they sent me a notice that I had not fulfilled my pledge.

Pigeye Brewster
Posts: 395
Joined: Thu Oct 05, 2017 7:33 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by Pigeye Brewster » Mon Jul 29, 2019 11:38 am

ChowYunPhat wrote:
Sun Jul 28, 2019 8:51 am
I think most people on this thread are missing the point. Have you ever tried to gift a share of stock to a dog rescue? I have...it's a giant pain in the butt and most charities (including so-called sophisticated charities) are not equipped with a brokerage account to liquidate gifts of securities. The DAF facilitates this. Even if they had the capability to receive securities, the DAF streamlines this process.

The DAF also serves to vet 501C3 paperwork which can help take the guesswork out of donating to less established organizations.

For the giver to obtain the tax benefit of capital gains relief and the charitable donation (from the DAF, not your ultimate charity) is the primary concern. The giver also has every incentive to move money out of the DAF rather quickly as the fees make this an uncompetitive vehicle vs. traditional investment accounts through VG or FIDO.
This is an excellent summary.

Another benefit that I've found is that my personal tax recordkeeping is much easier. Just one DAF donation tax receipt to keep track of rather than a bunch of individual tax receipts. And that's in the years I do bunch DAF funding; the other years I take the standard deduction.

User avatar
wander
Posts: 2789
Joined: Sat Oct 04, 2008 9:10 am

Re: DAF for church offering? [Donor Advised Fund]

Post by wander » Sat Oct 05, 2019 2:01 pm

This thread is a little old but I don't think that I need a new thread for just one question. For the pledge at your church, how do you identify yourself and the DAF fund so the church won't come after you when you pledge with your name and the fund comes out from family fund?

stan1
Posts: 7736
Joined: Mon Oct 08, 2007 4:35 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by stan1 » Sat Oct 05, 2019 2:08 pm

wander wrote:
Sat Oct 05, 2019 2:01 pm
This thread is a little old but I don't think that I need a new thread for just one question. For the pledge at your church, how do you identify yourself and the DAF fund so the church won't come after you when you pledge with your name and the fund comes out from family fund?
I'd just have a chat with the treasurer and explain how the funds will be coming in. If it is a small congregation and the family fund has your last name in it maybe it will be obvious. If you set up the DAF with a different name you might need to keep reminding them. A mega church with full time paid finance office will know how to handle DAFs.

inbox788
Posts: 6662
Joined: Thu Mar 15, 2012 5:24 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by inbox788 » Sat Oct 05, 2019 2:32 pm

duckcalldan wrote:
Mon Dec 26, 2016 8:45 am
I'm pretty sure I'm going to open a donor advised fund with Fidelity next year as I have plenty of LTCG and it just makes sense to switch my giving from cash to appreciated securities. Our giving is around $5K annually but I can see this figure increasing slightly over the next few years as we adjust to life in early retirement.

Probably half of our giving is to our local church, where we have been giving our offering twice a month through EFT. It seems feasible that we could do the same level of giving from our DAF but switch to once a month just to keep the annual grants to a minimum. Any experience with regular DAF giving throughout the year?
Makes sense, but IMO, monthly is too frequent for recurrent transactions unless it was all electronic. All that paper shuffling is just wasteful these days and introduces chances for error. Aim for quarterly or annual.

Longer term, consider benefits and effects of using QCDs with RMD.

viewtopic.php?t=236069
https://www.kiplinger.com/article/taxes ... -rmds.html
https://www.investmentnews.com/article/ ... ay-to-give
viewtopic.php?t=227027

BTW, I have tried, but failed to fix 2 problems with Fidelity DAF. I would like to know that the charity has correctly received the donation, but wish they would do it electronically. I tried leaving comments to email or text me, but so far they seem to be ignored by the charity.

I don't want them wasting resources sending me a letter, especially for smaller donations, and chewing up a larger percentage of the donation. On the other hand, sometimes I've gotten no confirmation of any kind that the charity has received the donation, and I'm left hanging as to whether the correct entity received it. For larger donations, I will contact the charity directly, but for smaller amounts, I'll just hope the system works.

ivk5
Posts: 989
Joined: Thu Sep 22, 2016 9:05 am

Re: DAF for church offering? [Donor Advised Fund]

Post by ivk5 » Sat Oct 05, 2019 3:46 pm

inbox788 wrote:
Sat Oct 05, 2019 2:32 pm

BTW, I have tried, but failed to fix 2 problems with Fidelity DAF. I would like to know that the charity has correctly received the donation, but wish they would do it electronically. I tried leaving comments to email or text me, but so far they seem to be ignored by the charity.

I don't want them wasting resources sending me a letter, especially for smaller donations, and chewing up a larger percentage of the donation. On the other hand, sometimes I've gotten no confirmation of any kind that the charity has received the donation, and I'm left hanging as to whether the correct entity received it. For larger donations, I will contact the charity directly, but for smaller amounts, I'll just hope the system works.
You can see on fidelity’s website if a check has cleared. I had one donation auto-voided by fidelity when the check went undeposited for some period of time (maybe 90 days, can’t remember).

curmudgeon
Posts: 1907
Joined: Thu Jun 20, 2013 11:00 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by curmudgeon » Sat Oct 05, 2019 3:58 pm

wander wrote:
Sat Oct 05, 2019 2:01 pm
This thread is a little old but I don't think that I need a new thread for just one question. For the pledge at your church, how do you identify yourself and the DAF fund so the church won't come after you when you pledge with your name and the fund comes out from family fund?
DAF and pledges are a tricky subject. A DAF donation can't be for something that will benefit you (tickets to a charity ball, for example) or to fulfill a legal obligation you have. The letter accompanying a Schwab DAF check, for example, says that it can't be used to fulfill a pre-existing pledge. Even if the "pledge" is not legally binding, this can cause confusion and issues.

Depending on the circumstances, perhaps you could make the pledge in the name of your DAF, (i.e. "Wander family DAF"). Or don't make a pledge at all, but make the donations as if you did. If the church is collecting pledges as, for example, backing for a loan, this might not work.

User avatar
willthrill81
Posts: 14008
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: DAF for church offering? [Donor Advised Fund]

Post by willthrill81 » Sat Oct 05, 2019 4:17 pm

While we don't do pledges, we do give to our church and other charities. As things stand right now, I anticipate that we'll give a lump sum to a DAF from our tax-deferred holdings upon retirement and then give from the DAF until we start taking RMDs and can make QCDs every year instead (how's that for acronyms?). This will enable us to take advantage of a tax-deduction in the year that we donate the lump sum that we would not otherwise be able to due to the amounts involved.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
wander
Posts: 2789
Joined: Sat Oct 04, 2008 9:10 am

Re: DAF for church offering? [Donor Advised Fund]

Post by wander » Sat Oct 05, 2019 5:55 pm

Thanks all for your replies. I like your ideas and will write a note on the pledge card. If someone contacts us later to remind about the missing gifts, we will correct it with the treasurer.

Pigeye Brewster
Posts: 395
Joined: Thu Oct 05, 2017 7:33 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by Pigeye Brewster » Sat Oct 05, 2019 6:06 pm

wander wrote:
Sat Oct 05, 2019 5:55 pm
Thanks all for your replies. I like your ideas and will write a note on the pledge card. If someone contacts us later to remind about the missing gifts, we will correct it with the treasurer.
Fidelity Charitable has this language on their website:

Grants can be made in support of non-legally binding pledges. Accordingly, you may tell charities that you “intend to recommend a grant from your donor-advised fund in the amount of [$]” so they know your grant recommendation is being made in response to a charitable organization’s request for a commitment.

https://www.fidelitycharitable.org/faqs.html#grants

User avatar
dodecahedron
Posts: 4826
Joined: Tue Nov 12, 2013 12:28 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by dodecahedron » Sat Oct 05, 2019 6:36 pm

stan1 wrote:
Sat Oct 05, 2019 2:08 pm
wander wrote:
Sat Oct 05, 2019 2:01 pm
This thread is a little old but I don't think that I need a new thread for just one question. For the pledge at your church, how do you identify yourself and the DAF fund so the church won't come after you when you pledge with your name and the fund comes out from family fund?
I'd just have a chat with the treasurer and explain how the funds will be coming in. If it is a small congregation and the family fund has your last name in it maybe it will be obvious. If you set up the DAF with a different name you might need to keep reminding them. A mega church with full time paid finance office will know how to handle DAFs.
My DAF (Schwab) has a dropdown menu item stating ¨Schwab Charitable will send a letter to the charity with this grant acknowledging the person(s) who recommended it. Choose below how you would like to be acknowledged.¨ and the choices in my current dropdown list are ¨dodecahedron, dodecahedron & her [named] daughters, or anonymous¨ with the additional option to write in someone else´s name to be acknowledged (e.g., I suppose I could enter ¨Santa Claus¨ as the name to be acknowledged. Or maybe not. But any reasonable name seems to be okay.) My daughters are also advisors to the DAF so they could list just themselves as the person to be acknowledged. There is also the option to have the name of the DAF fund on the customized letterhead (e.g., letterhead can read at the top ¨Memorial Fund in Memory of Dodecahedron´s Late Husband.¨) And even if don´t choose anonymity, I have the option to have my address included or not included in the letter. (Not including it means I don´t want or need a letter of thanks and I also don´t want to be on the charity´s mailing list.)

inbox788
Posts: 6662
Joined: Thu Mar 15, 2012 5:24 pm

Re: DAF for church offering? [Donor Advised Fund]

Post by inbox788 » Sat Oct 05, 2019 6:48 pm

ivk5 wrote:
Sat Oct 05, 2019 3:46 pm
You can see on fidelity’s website if a check has cleared. I had one donation auto-voided by fidelity when the check went undeposited for some period of time (maybe 90 days, can’t remember).
Yes, that tells you the check has been cashed, but not exactly by whom and how it was used. Come to think of it, one way to reduce the unwanted thank you letters is to NOT provide an address to send it to. I knew about anonymous option, but forgot you could simply provide a name only and no address.

Another benefit is that without an address, they won't solicit you for additional donations. I've made the mistake of doing so more than once, and sometimes you can notify them that it was a one time donation and not to bother you again, but I have one charity that won't listen. They've wasted and spent many times my donation sending me solicitations several times a year for many despite being asked to stop, so I've given up and just ignore them now.
stan1 wrote:
Sat Oct 05, 2019 2:08 pm
wander wrote:
Sat Oct 05, 2019 2:01 pm
This thread is a little old but I don't think that I need a new thread for just one question. For the pledge at your church, how do you identify yourself and the DAF fund so the church won't come after you when you pledge with your name and the fund comes out from family fund?
I'd just have a chat with the treasurer and explain how the funds will be coming in. If it is a small congregation and the family fund has your last name in it maybe it will be obvious. If you set up the DAF with a different name you might need to keep reminding them. A mega church with full time paid finance office will know how to handle DAFs.
That's the extra footwork on the donor's part that's going to be required to confirm the donation was routed to the final intended recipient. With some donations, I have a donor number that I include in the comments section to help with that if someone notices. Otherwise it's just talking to the correct individual.

Post Reply