Fidelity DAF--how to minimize fees

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mookie
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Fidelity DAF--how to minimize fees

Post by mookie »

I have a Fidelity DAF. In order to get me over the standard deduction, I bundle my contributions to the DAF by contributing to it every other year. The Fidelity DAF fees are $100 or 0.6%, whichever is higher.

In order to minimize my DAF fees, should I keep the balance in the DAF at or near zero--i.e. grant all the money that I have in the DAF immediately after I fund the DAF? This would mean bundling my contributions to the actual charities to every other year.
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bengal22
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Re: Fidelity DAF--how to minimize fees

Post by bengal22 »

mookie wrote: Tue Oct 15, 2019 10:16 am I have a Fidelity DAF. In order to get me over the standard deduction, I bundle my contributions to the DAF by contributing to it every other year. The Fidelity DAF fees are $100 or 0.6%, whichever is higher.

In order to minimize my DAF fees, should I keep the balance in the DAF at or near zero--i.e. grant all the money that I have in the DAF immediately after I fund the DAF? This would mean bundling my contributions to the actual charities to every other year.
Try the Dayton Foundation. No fees for their charitable checking account.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley
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dm200
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Re: Fidelity DAF--how to minimize fees

Post by dm200 »

mookie wrote: Tue Oct 15, 2019 10:16 am I have a Fidelity DAF. In order to get me over the standard deduction, I bundle my contributions to the DAF by contributing to it every other year. The Fidelity DAF fees are $100 or 0.6%, whichever is higher.
In order to minimize my DAF fees, should I keep the balance in the DAF at or near zero--i.e. grant all the money that I have in the DAF immediately after I fund the DAF? This would mean bundling my contributions to the actual charities to every other year.
I view our Fidelity DAF a bit differently.

I consider the 0.6% to be well worthwhile for the benefits we receive: convenience in requesting grants, ability to request anonymous grants, large choices of investments, and so on.

It is our plan and intention to have our Fidelity DAF continue for a very long time - just requesting grants in amounts that do not eat into our 'target" value. We even hope that our son and his wife will continue this DAF after we are gone - and requesting grants to our favorite "charities" as long as possible.
fposte
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Re: Fidelity DAF--how to minimize fees

Post by fposte »

Since you have to pay $100 a year for any amount between $0 and $16,666, I don't see a financial benefit of taking the fund down to 0. Or maybe yours is so generously funded that $16k feels like zero to you.

I'm with dm200 in not really factoring in the expense, but yes, if you wanted to squeeze every drop out of it it probably makes sense to keep the assets below $16k in the year you're not contributing.
pyld76
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Re: Fidelity DAF--how to minimize fees

Post by pyld76 »

bengal22 wrote: Tue Oct 15, 2019 10:25 am
mookie wrote: Tue Oct 15, 2019 10:16 am I have a Fidelity DAF. In order to get me over the standard deduction, I bundle my contributions to the DAF by contributing to it every other year. The Fidelity DAF fees are $100 or 0.6%, whichever is higher.

In order to minimize my DAF fees, should I keep the balance in the DAF at or near zero--i.e. grant all the money that I have in the DAF immediately after I fund the DAF? This would mean bundling my contributions to the actual charities to every other year.
Try the Dayton Foundation. No fees for their charitable checking account.
Yeah. Well, when you compare the Dayton Foundation's offering which actually looks like a Fidelity DAF (money in DAF invested in something), the fees are higher (0.7% on up) and the investment options are opaque. That's comparing apples and tangerines.

I live with the .6 fee from Fido as the cost to growth and convenience for my charitable giving. YMMV, of course.
stlutz
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Re: Fidelity DAF--how to minimize fees

Post by stlutz »

I don't let my balance get too high simply because I don't find it difficult to find things I want to support now as opposed to waiting for 5 years.
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bengal22
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Re: Fidelity DAF--how to minimize fees

Post by bengal22 »

pyld76 wrote: Tue Oct 15, 2019 11:07 am
bengal22 wrote: Tue Oct 15, 2019 10:25 am
mookie wrote: Tue Oct 15, 2019 10:16 am I have a Fidelity DAF. In order to get me over the standard deduction, I bundle my contributions to the DAF by contributing to it every other year. The Fidelity DAF fees are $100 or 0.6%, whichever is higher.

In order to minimize my DAF fees, should I keep the balance in the DAF at or near zero--i.e. grant all the money that I have in the DAF immediately after I fund the DAF? This would mean bundling my contributions to the actual charities to every other year.
Try the Dayton Foundation. No fees for their charitable checking account.
Yeah. Well, when you compare the Dayton Foundation's offering which actually looks like a Fidelity DAF (money in DAF invested in something), the fees are higher (0.7% on up) and the investment options are opaque. That's comparing apples and tangerines.

I live with the .6 fee from Fido as the cost to growth and convenience for my charitable giving. YMMV, of course.
I use the charitable giving check book which has no fees. But yes they do not have any investment appreciation. But with no minimum and no fees it works great for my bunching of charitable giving.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley
inbox788
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Re: Fidelity DAF--how to minimize fees

Post by inbox788 »

mookie wrote: Tue Oct 15, 2019 10:16 am I have a Fidelity DAF. In order to get me over the standard deduction, I bundle my contributions to the DAF by contributing to it every other year. The Fidelity DAF fees are $100 or 0.6%, whichever is higher.

In order to minimize my DAF fees, should I keep the balance in the DAF at or near zero--i.e. grant all the money that I have in the DAF immediately after I fund the DAF? This would mean bundling my contributions to the actual charities to every other year.
NO! Just do what you're doing without regard to the DAF fees. It's small potatoes compared to the tax savings from donating appreciated shares. You might also consider bundling every 3rd year or 4th year and taking the standard deduction the other years. Run some numbers, and you'll should see benefits well beyond $100. Keep life simple. One of the main benefits of a DAF is to decouple the tax decisions from the giving decisions.

The main drawback of bundling larger amounts is that you'll advance the transfer from taxable account to DAF, and any future tax deductions from appreciation in the taxable account vs DAF. For my contribution level, I'm finding the losses from annual standard deduction threshold quite high and more than my expected tax writeoff in 2 or 3 years. YMMV.
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CAsage
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Re: Fidelity DAF--how to minimize fees

Post by CAsage »

I must be the odd egg head on this one! I could not care less about the very small fees that Fidelity charges (and I have a Fidelity DAF because the minimums were higher than my budget at Vanguard). Honestly, the overhead in charities in general, administration, fundraising, fees etc will enormously dwarf any investment fees in your DAF. I donated the money, wrote it off (back in 2017, when I could) and will distribute big chunks every January. No longer my money, I don't care what they charge (within reason, naturally). I will add more periodically, on the alternating years I can shift my taxes.
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Artsdoctor
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Re: Fidelity DAF--how to minimize fees

Post by Artsdoctor »

Mookie,

It's smart to look at fees with any investment, so your question shows you're looking at investments with an eye on expenses.

However, sometimes fees are necessary and worthwhile. I've been using a DAF for many years and also was weary of "unnecessary" expenses early on. With time, I came to appreciate how important a DAF really can be when viewed in the general scheme of things, and I no longer am bothered at all by what I've come to accept as relatively reasonable fees.

Consider using a DAF as a mechanism to rebalance. Your biggest bang for your buck will be tax-loss harvesting during the bad years, taking those losses annually, carrying over those losses for years to come, and then donating some of the super-appreciated shares to a DAF during the great years. You'll get the perpetual $3,000 loss against income, you'll take the charitable contribution as a deduction, you'll rebalance without any tax consequence, and your DAF balance should grow as well. In fact, I found that having a DAF made me more philanthropic.

Batching DAF contributions is good, but you still don't know how the market is going to be in any given year. We've had a tremendous run-up over the past decade so if you're really sitting on tremendous capital gains, considering funding your DAF with several years of donations. In the event that the market really continues to climb, you can then just contribute more (to rebalance).

The DAF, in my opinion, should be viewed as an independent entity. You can make decisions on giving based on how the DAF is doing (and that including the fees as well as the gains/losses).
StealthRabbit
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Re: Fidelity DAF--how to minimize fees

Post by StealthRabbit »

Yes, DAF fees are the cost of doing business to get an easy place to drop highly appreciated assets for future perpetual gifting.

Different strokes...
I set mine up 25 yrs ago and grew it enough to perpetually fund my charities / NGO projects (through retirement, and beyond)

Kid's inheritance is they are being groomed to manage DAF, or preferably their own DAF.
Our trust distributes all final assets to DAF.

I purposed to give away more than I spent on myself, so far, so good.
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dm200
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Re: Fidelity DAF--how to minimize fees

Post by dm200 »

StealthRabbit wrote: Wed Oct 16, 2019 2:57 am Yes, DAF fees are the cost of doing business to get an easy place to drop highly appreciated assets for future perpetual gifting.
Different strokes...
I set mine up 25 yrs ago and grew it enough to perpetually fund my charities / NGO projects (through retirement, and beyond)
Kid's inheritance is they are being groomed to manage DAF, or preferably their own DAF.
Our trust distributes all final assets to DAF.
I purposed to give away more than I spent on myself, so far, so good.
Yes - while our Fidelity DAF is not large, we are above the $100 per year fees - and pay the 0.60%.

We are doing about the same as you are doing - except not further funding DAF as part of our estate.

Our mix of investments in the DAF is:
59% US Equity
29% Fixed
9% International Equity
3% Money Market

We need/desire to do annual grants at a minimum of about 2% of the target balance - but do more when the balance goes above the target.

I hope that we can "educate" our son and daughter-in-law to keep this going long after DW and I are gone - funding our chosen charitable entity as long as that entity does what it is doing now (funding education, sanitation, reforestation, agriculture, etc. in a remote part of a very, very poor country)
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wander
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Re: Fidelity DAF--how to minimize fees

Post by wander »

We have just started. $100 is well worth it.
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Re: Fidelity DAF--how to minimize fees

Post by TimeRunner »

CAsage wrote: Tue Oct 15, 2019 2:36 pm I must be the odd egg head on this one! I could not care less about the very small fees that Fidelity charges (and I have a Fidelity DAF because the minimums were higher than my budget at Vanguard). Honestly, the overhead in charities in general, administration, fundraising, fees etc will enormously dwarf any investment fees in your DAF. I donated the money, wrote it off (back in 2017, when I could) and will distribute big chunks every January. No longer my money, I don't care what they charge (within reason, naturally). I will add more periodically, on the alternating years I can shift my taxes.
+1. It's not YOUR money anymore. Be happy you can at least direct it and pay for memberships to non-profit local organizations, etc. Annual fee is small potatoes.
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stlutz
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Re: Fidelity DAF--how to minimize fees

Post by stlutz »

dm200 wrote: Wed Oct 16, 2019 8:56 am
We need/desire to do annual grants at a minimum of about 2% of the target balance - but do more when the balance goes above the target.

I hope that we can "educate" our son and daughter-in-law to keep this going long after DW and I are gone - funding our chosen charitable entity as long as that entity does what it is doing now (funding education, sanitation, reforestation, agriculture, etc. in a remote part of a very, very poor country)
The problem with this approach is that over time one out of every four dollars that leaves the DAF goes to Fidelity.
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Re: Fidelity DAF--how to minimize fees

Post by StealthRabbit »

dm200 wrote: Wed Oct 16, 2019 8:56 am ...
We need/desire to do annual grants at a minimum of about 2% of the target balance - but do more when the balance goes above the target.
...
We target 10% annual withdrawals from DAF, and try to obtain 10%+ growth. +/-

DAF may deplete at age 80+ if we have some lean yrs of growth (likely)

Running eMoney scenarios yesterday indicates a probability that we will need to do QCD's from RMD requirements about age 80. So will substitute QCD's for what is currently DAF grants.

If I do significant Roth rolls age 66 - 71, I may utilize additional contributions to the DAF to keep marginal tax rate in check.

We wrote out a 'plan', just in case kids end of with assets from our trust / IRA distributions, they will continue to fund our designated charities (for last 40 yrs) as long as the MGO purpose and progress remains consistent with our designated gifting objectives. This would only happen of both spouses die at the same time. (with 100+ 737 flights / yr, a common / mutual demise is possible, but unlikely)
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Re: Fidelity DAF--how to minimize fees

Post by StealthRabbit »

dm200 wrote: Wed Oct 16, 2019 8:56 am ...
We need/desire to do annual grants at a minimum of about 2% of the target balance - but do more when the balance goes above the target.
...
We target 10% annual withdrawals from DAF, and try to obtain 10%+ growth. +/-

DAF may deplete at age 80+ if we have some lean yrs of growth (likely)

Running eMoney scenarios yesterday indicates a probability that we will need to do QCD's from RMD requirements about age 80. So will substitute QCD's for what is currently DAF grants.

If I do significant Roth rolls age 66 - 71, I may utilize additional contributions to the DAF to keep marginal tax rate in check.

We wrote out a 'plan', just in case kids end of with assets from our trust / IRA distributions, they will continue to fund our designated charities as long as the NGO purpose and progress remains consistent with our designated gifting objectives.
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Re: Fidelity DAF--how to minimize fees

Post by Stinky »

CAsage wrote: Tue Oct 15, 2019 2:36 pm I must be the odd egg head on this one! I could not care less about the very small fees that Fidelity charges (and I have a Fidelity DAF because the minimums were higher than my budget at Vanguard). Honestly, the overhead in charities in general, administration, fundraising, fees etc will enormously dwarf any investment fees in your DAF. I donated the money, wrote it off (back in 2017, when I could) and will distribute big chunks every January. No longer my money, I don't care what they charge (within reason, naturally). I will add more periodically, on the alternating years I can shift my taxes.
Agree 100%.
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Re: Fidelity DAF--how to minimize fees

Post by exoilman »

dm200 wrote: Tue Oct 15, 2019 10:31 am
mookie wrote: Tue Oct 15, 2019 10:16 am I have a Fidelity DAF. In order to get me over the standard deduction, I bundle my contributions to the DAF by contributing to it every other year. The Fidelity DAF fees are $100 or 0.6%, whichever is higher.
In order to minimize my DAF fees, should I keep the balance in the DAF at or near zero--i.e. grant all the money that I have in the DAF immediately after I fund the DAF? This would mean bundling my contributions to the actual charities to every other year.
I view our Fidelity DAF a bit differently.

I consider the 0.6% to be well worthwhile for the benefits we receive: convenience in requesting grants, ability to request anonymous grants, large choices of investments, and so on.

It is our plan and intention to have our Fidelity DAF continue for a very long time - just requesting grants in amounts that do not eat into our 'target" value. We even hope that our son and his wife will continue this DAF after we are gone - and requesting grants to our favorite "charities" as long as possible.
+10
inbox788
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Re: Fidelity DAF--how to minimize fees

Post by inbox788 »

dm200 wrote: Wed Oct 16, 2019 8:56 amYes - while our Fidelity DAF is not large, we are above the $100 per year fees - and pay the 0.60%.
I haven't noticed the $100 fee. When is it charged? Are they taking out 0.60% on an ongoing basis? When do they square up to $100 for smaller accounts? Maybe I've managed to stay above the threshold or maybe on an average basis. [Went back and looked at the available last 2 years and I did stay above, but in past years, I'm pretty sure I was below and didn't see an itemized annual fee charge].
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dm200
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Re: Fidelity DAF--how to minimize fees

Post by dm200 »

inbox788 wrote: Sat Oct 19, 2019 5:01 pm
dm200 wrote: Wed Oct 16, 2019 8:56 amYes - while our Fidelity DAF is not large, we are above the $100 per year fees - and pay the 0.60%.
I haven't noticed the $100 fee. When is it charged? Are they taking out 0.60% on an ongoing basis? When do they square up to $100 for smaller accounts? Maybe I've managed to stay above the threshold or maybe on an average basis. [Went back and looked at the available last 2 years and I did stay above, but in past years, I'm pretty sure I was below and didn't see an itemized annual fee charge].
I believe it is annually - not sure exactly when - or if you actually see a transaction.

We have always been above the balance of being charged the $100 minimum
retiringwhen
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Re: Fidelity DAF--how to minimize fees

Post by retiringwhen »

I found this info in the Fidelity Charitable Program Guidelines, page 19:
https://www.fidelitycharitable.org/content/dam/fc-public/docs/programs/fidelity-charitable-program-guidelines.pdf wrote:Each individual Giving Account is assessed an annual administrative fee of 0.60% of Giving
Account assets or $100, whichever is greater. Each corporate Giving Account is assessed an
annual administrative fee of 0.60% of Giving Account assets or $500, whichever is greater.
Additional fees may apply for additional programs, services, or investment options.

The administrative fee of 0.60% is charged to the investment pool on a daily basis and affects
the net asset value of the Giving Account pool holdings. Giving Accounts for which the
0.60% administrative fee is less than $100 for a given fiscal year will be assessed the
difference between $100 and that 0.60% fee11. Such charges take place at the end of the
fiscal year12 and are prorated for Giving Accounts funded during the course of the fiscal year.

11Fidelity Charitable may elect not to assess the difference between the 0.60% fee and $100 if it results in a
charge of less than $10.
12The Fiscal year ends - June 30th.
This means that if the average daily balance is less than $15,000 for the year, then the difference between the total of the daily fee and $100 fee should/may be levied on our about June 30th each year.

An example, let's say $10,000 is the daily average balance from July 1st to June 30th. Then $10,000*.006=$60. So in theory you should see a fee removed for $40 around June 30th.
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dm200
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Re: Fidelity DAF--how to minimize fees

Post by dm200 »

retiringwhen wrote: Sun Oct 20, 2019 4:37 pm I found this info in the Fidelity Charitable Program Guidelines, page 19:
https://www.fidelitycharitable.org/content/dam/fc-public/docs/programs/fidelity-charitable-program-guidelines.pdf wrote:Each individual Giving Account is assessed an annual administrative fee of 0.60% of Giving
Account assets or $100, whichever is greater. Each corporate Giving Account is assessed an
annual administrative fee of 0.60% of Giving Account assets or $500, whichever is greater.
Additional fees may apply for additional programs, services, or investment options.

The administrative fee of 0.60% is charged to the investment pool on a daily basis and affects
the net asset value of the Giving Account pool holdings. Giving Accounts for which the
0.60% administrative fee is less than $100 for a given fiscal year will be assessed the
difference between $100 and that 0.60% fee11. Such charges take place at the end of the
fiscal year12 and are prorated for Giving Accounts funded during the course of the fiscal year.
11Fidelity Charitable may elect not to assess the difference between the 0.60% fee and $100 if it results in a
charge of less than $10.
12The Fiscal year ends - June 30th.
This means that if the average daily balance is less than $15,000 for the year, then the difference between the total of the daily fee and $100 fee should/may be levied on our about June 30th each year.
An example, let's say $10,000 is the daily average balance from July 1st to June 30th. Then $10,000*.006=$60. So in theory you should see a fee removed for $40 around June 30th.
OK - that makes sense that this 0.60% is charged daily - just like other type expenses for mutual funds.
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PhysicianOnFIRE
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Re: Fidelity DAF--how to minimize fees

Post by PhysicianOnFIRE »

Think of the fee as the difference between the tax drag your money would see in a taxable brokerage account (about 0.5% for me) and the 0.6% they charge. Now it's 10 basis points instead of 60.

You get a lot of great benefits for that 0.1% to 0.3% that others have mentioned. The flushing out of capital gains by donating your most highly-appreciated assets is a big one.

The more distance you can afford to put between donations (while still giving the same amount) would also make your giving more tax-efficient. In my case, I hit the $10k deduction limit on SALT / property tax, so the first $14,400 of charitable giving benefits from no tax deduction (married filing jointly). A $20,000 donation to the DAF would result in a deduction of $5,600 (28% of the gift). A $100,000 donation would result in a deduction of $86,400 (86.4% of the gift).

:beer
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tj
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Re: Fidelity DAF--how to minimize fees

Post by tj »

I put in 17k a couple years ago which was coincidentally before the tax law changed. I just check periodically and grant out the amount that is over 17k. As long as you keep your assets in the daf over 17k, you won't be charged more then 60bps
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Re: Fidelity DAF--how to minimize fees

Post by MathIsMyWayr »

PhysicianOnFIRE wrote: Mon Oct 21, 2019 8:40 am Think of the fee as the difference between the tax drag your money would see in a taxable brokerage account (about 0.5% for me) and the 0.6% they charge. Now it's 10 basis points instead of 60.

You get a lot of great benefits for that 0.1% to 0.3% that others have mentioned. The flushing out of capital gains by donating your most highly-appreciated assets is a big one.

The more distance you can afford to put between donations (while still giving the same amount) would also make your giving more tax-efficient. In my case, I hit the $10k deduction limit on SALT / property tax, so the first $14,400 of charitable giving benefits from no tax deduction (married filing jointly). A $20,000 donation to the DAF would result in a deduction of $5,600 (28% of the gift). A $100,000 donation would result in a deduction of $86,400 (86.4% of the gift).

:beer
-PoF
Thank you for pointing out another way of looking at the DAF fee of 0.60%. I have highly appreciated shares of a former employer. There is no way of escaping tax on the NUA capital gains except through charitable donations. The tax drag on dividends of 2% is 0.49% and 0.56%, without and with 3.8% NIIT, respectively (including 9.3% CA state tax). The net annual cost of DAF is 0.11% or 0.04%. The chance of eliminating the risk of owning individual company shares is a bonus.
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PhysicianOnFIRE
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Re: Fidelity DAF--how to minimize fees

Post by PhysicianOnFIRE »

MathIsMyWayr wrote: Mon Oct 21, 2019 4:46 pm
PhysicianOnFIRE wrote: Mon Oct 21, 2019 8:40 am Think of the fee as the difference between the tax drag your money would see in a taxable brokerage account (about 0.5% for me) and the 0.6% they charge. Now it's 10 basis points instead of 60.

You get a lot of great benefits for that 0.1% to 0.3% that others have mentioned. The flushing out of capital gains by donating your most highly-appreciated assets is a big one.

The more distance you can afford to put between donations (while still giving the same amount) would also make your giving more tax-efficient. In my case, I hit the $10k deduction limit on SALT / property tax, so the first $14,400 of charitable giving benefits from no tax deduction (married filing jointly). A $20,000 donation to the DAF would result in a deduction of $5,600 (28% of the gift). A $100,000 donation would result in a deduction of $86,400 (86.4% of the gift).

:beer
-PoF
Thank you for pointing out another way of looking at the DAF fee of 0.60%. I have highly appreciated shares of a former employer. There is no way of escaping tax on the NUA capital gains except through charitable donations. The tax drag on dividends of 2% is 0.49% and 0.56%, without and with 3.8% NIIT, respectively (including 9.3% CA state tax). The net annual cost of DAF is 0.11% or 0.04%. The chance of eliminating the risk of owning individual company shares is a bonus.
It's practically a wash. When I hear the "high fees" mentioned as a negative of the DAF, the alternative cost of keeping the money outside of a DAF is rarely considered. In MN, paying the NIIT and 9.85% marginal state income tax, tax drag was 0.58% on 2% dividends.

:beer
-PoF
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neurosphere
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Re: Fidelity DAF--how to minimize fees

Post by neurosphere »

fyi, I know this thread is about Fidelity, but I just had a nice chat with a woman at Vanguard Charitable who said that Vanguard's low balance fee of $250 kicks in at $15,000. And I believe (but don't remember for sure) that it's assessed in March and perhaps based on the value at that time? E.g. not a dollar amount trigger but an amount-at-the-time trigger. I wish I would have asked more about that. Maybe that info is codified somewhere in their documents and is not "inside" info.
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