Taxable Investing vs Donor Advisor Fund vs ???

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blueman457
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Taxable Investing vs Donor Advisor Fund vs ???

Post by blueman457 » Thu Mar 29, 2018 11:12 am

After paying off significant debt, we are starting to save for a down payment, and figure how "give money" to charities. The new tax laws change things a little bit so I'm trying to understand the implications of each. Is my understanding correct?

I've read this: viewtopic.php?t=203569 which I thought was insightful.

Benefits of DAF:
-Easy to write a check (seems like on-line bill pay)
-Growth is tax free
-Can take tax deduction immediately on the amount donated

Downsides:
-It's no longer your money
-Growth can be significant and could have taken bigger tax deduction

Benefits of Donating Shares:
-Money is still yours
-Growth can be significant and can take a bigger tax deduction
-Can still lump sum

Downsides:
-Smaller charities cannot accept shares (therefore have to sell stock, then donate, facing capital gains?)

Is this all?

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dm200
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Re: Taxable Investing vs Donor Advisor Fund vs ???

Post by dm200 » Thu Mar 29, 2018 11:27 am

blueman457 wrote:
Thu Mar 29, 2018 11:12 am
After paying off significant debt, we are starting to save for a down payment, and figure how "give money" to charities. The new tax laws change things a little bit so I'm trying to understand the implications of each. Is my understanding correct?
I've read this: viewtopic.php?t=203569 which I thought was insightful.
Benefits of DAF:
-Easy to write a check (seems like on-line bill pay)
-Growth is tax free
-Can take tax deduction immediately on the amount donated
Downsides:
-It's no longer your money
-Growth can be significant and could have taken bigger tax deduction
Benefits of Donating Shares:
-Money is still yours
-Growth can be significant and can take a bigger tax deduction
-Can still lump sum
Downsides:
-Smaller charities cannot accept shares (therefore have to sell stock, then donate, facing capital gains?)
Is this all?
DAFs have higher expense ratios than similar or equivalent investments not in a DAF
-It's no longer your money
This may be an advantage because it is complete "asset protection" of such money.

You can make completely anonymous "grants" to charities - keeps you off the mailing or other lists. You still get the tax deduction when you fund the DAF. There may also be other reasons for anonymous "grants"

Based on our Fidelity DAF experience - everything was and is completely convenient and accurate.

Even if some smaller entities (charities, church, faith entities) can accept stock donations, they may not be very good at dealing with it.

There are many very fine charities/places of worship, etc. that do great things and are 100% in line with what you want to fund. For many reasons, however, it is common that such entities cannot or may not be able to properly handle a lump sum donation that the donor wants to be spread out over a number of years to fund the purposes of the charity, etc. I support primarily one of such an entity. Two types of this as examples:

1. A charity has rules or procedures as well as disclosures showing that it funds the purposes of the charity and does not just sit on money. A large donation could not be spread over many years because it might violate the rules/procedures and/or would make the charity appear to not be funding its purpose.

2. A place of worship (or associated charitable entity) could (within its rules) keep funds/investments to be spread over time. However, this entity (for whatever reasons) completely lacks the skills and expertise to properly manage such funds. For example, the person(s) handling the finances might just leave large amounts in low/no interest checking accounts for years.

Over the many years I have been involved with aspects of an entity I support, BOTH #1 and #2 have been (or are) the case.

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dm200
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Re: Taxable Investing vs Donor Advisor Fund vs ???

Post by dm200 » Thu Mar 29, 2018 11:30 am

Let me also add that your DAF account can have successor authorized folks - so you could set this up to last for a very, very long time - perhaps many decades after your death.

I have not had this personally, but others can make a donation to YOUR DAF. In such cases, these donor(s) could support YOUR goals/objectives/decisions and not have to make the larger donations of having their own DAF account.

radiowave
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Re: Taxable Investing vs Donor Advisor Fund vs ???

Post by radiowave » Thu Mar 29, 2018 11:37 am

This was our first year with a DAF and it went very well. It took a little bit of time to move some old individual stocks to move over, but nothing to prevent full implementation prior to end of December. Yes, ER are a bit higher and they have set assets you choose, but we spent most of the money down so the funds were only "exposed" to the higher ER for just a few weeks. And we only had the DAF and a few small Goodwill clothing donations to put on our taxes for 2017.

We're not sure if we'll use the DAF this coming year due to new tax law whether it would be worth itemizing.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

SRenaeP
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Re: Taxable Investing vs Donor Advisor Fund vs ???

Post by SRenaeP » Thu Mar 29, 2018 11:45 am

blueman457 wrote:
Thu Mar 29, 2018 11:12 am
...

Downsides:
-Smaller charities cannot accept shares (therefore have to sell stock, then donate, facing capital gains?)

Is this all?
You can donate shares to a DAF then almost immediately have them issue a grant to the charity of choice. I have a Fidelity DAF that I utilize in this manner. This eliminated the issue of the charity not being able to accept the shares directly.

Pigeye Brewster
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Re: Taxable Investing vs Donor Advisor Fund vs ???

Post by Pigeye Brewster » Thu Mar 29, 2018 12:00 pm

Depending on how many charities you support, another possible benefit of a DAF is ease of record-keeping for tax purposes. One donation to the DAF versus keeping track of tax receipts from multiple donations.

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dm200
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Re: Taxable Investing vs Donor Advisor Fund vs ???

Post by dm200 » Thu Mar 29, 2018 12:01 pm

Pigeye Brewster wrote:
Thu Mar 29, 2018 12:00 pm
Depending on how many charities you support, another possible benefit of a DAF is ease of record-keeping for tax purposes. One donation to the DAF versus keeping track of tax receipts from multiple donations.
Yes - good point.

inbox788
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Re: Taxable Investing vs Donor Advisor Fund vs ???

Post by inbox788 » Thu Mar 29, 2018 1:08 pm

It doesn't have to be an either/or, why not both? It takes a minimum to open a DAF, but anything more than that can be kept in taxable and donated to the DAF at a later time. With the new tax reform, higher standard deduction and limitations on some deductions, some of the charitable deduction benefit is going away. You might get more deductions by lumping donations into every other year or so, and a DAF can help.

Swansea
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Re: Taxable Investing vs Donor Advisor Fund vs ???

Post by Swansea » Thu Mar 29, 2018 3:27 pm

Among other things I like about a DAF, is that I no longer need an acknowledgement from the charity (for gifts $250 or over). My charities are small, all volunteer groups who, are sometimes not prompt about providing paperwork which would be needed if the contributions were not made through the DAF.
My Schwab DAF does an excellent job on keeping the documentation I need to support the deductions.

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dm200
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Re: Taxable Investing vs Donor Advisor Fund vs ???

Post by dm200 » Thu Mar 29, 2018 3:48 pm

Swansea wrote:
Thu Mar 29, 2018 3:27 pm
Among other things I like about a DAF, is that I no longer need an acknowledgement from the charity (for gifts $250 or over). My charities are small, all volunteer groups who, are sometimes not prompt about providing paperwork which would be needed if the contributions were not made through the DAF.
My Schwab DAF does an excellent job on keeping the documentation I need to support the deductions.
Yes - add more things to the list :)

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