DAF Giving Tutorial from Fidelity and Vanguard Charitable

One of my goals when I started this site was to inspire. Inspiration is a lofty goal, and a loaded word, but charitable giving is one area where I love to see others follow my lead.

Set For LifeA month ago, I shared the news of my gift of $100,000 with you, and I am happy to report that several of you were indeed inspired to contribute handsomely to newly founded donor advised funds (DAFs) of your own. Via the comments section and e-mail, I heard from at least five readers, two of whom also reported giving $100,000.

One of those five readers, a young man named TJ Pridonoff who does not bring home a physician’s salary, opened a Fidelity Charitable account, which can be started with as little as $5,000 with a fee of $100 a year for the first $16,667 and .06% of additional dollars. Being an optimizer, TJ got the most bang for his buck and wrote about it here in The $17,000 Christmas Present.

Today, I’d like to look at the flip side of DAF giving. So far, I’ve focused on getting money into a DAF and the tax benefits that result from your generosity. Today, I will demonstrate how to share that money by giving from the DAF directly to charitable organizations.

 

Vanguard Charitable Giving

 

My first DAF was with T. Rowe Price, but several years ago I made a transition, moving pretty much all of my retirement and donated dollars from T. Rowe Price to Vanguard. The price of admission to get started with Vanguard Charitable is $25,000, and the minimum grant is $500.

[Note: In the following screenshots, our fund names and some charity names have been edited or deleted]

 

When you login to Vanguard Charitable, you will see a summary screen that looks something like this:

 

vanguard charitable summary

 

Under “Quick links,” you’ll see options to add to your account or subtract from it. I’m here to show you how to give, so we’ll select “Recommend a grant.” Alternatively, you can choose the same option from the header towards the top of the screen that looks like this:

 

 

Next, you will see a screen that includes charities that have benefitted from previous giving. If this is a repeat gift, simply select “One-time grant” next to the charity. To set up a recurrent grant on a schedule, as I’ve done indicated by the 2 arrows forming a circle, you can select “Recurring grant” to assign a dollar amount and frequency.

 

 

You’ll notice that Fidelity Charitable is on this list. For reasons that I will detail later, I donated from one DAF to establish another. Both are 501(c)(3) charities, so you are allowed to transfer money between them.

Today’s giving recipient is not on the list, so we’ll choose the green button at the bottom, “Add a new charity

 

 

You’ll have an opportunity to perform a search of over a million charities via Guidestar. If the search yields a successful result, the information will be imported. If the search is fruitless, you can still donate as long as the recipient is registered as a 501(c)(3) charity. You’ll need the charity’s name, EIN, and address.

In this case, I filled out the form manually, as the Guidestar search did not find the particular charity I was looking for. I contacted the charity to obtain the EIN and official name of the charitable organization, and was good to go.

Once you’ve clicked on Add charity, you will choose the amount to donate and from which allocation. Since all my DAF dollars are invested in the Total Equity fund (55% S&P 500, 15% extended market, 30% international), my donation will come from there.

 

 

You can choose when to donate, but I chose “As soon as possible,” so the check should arrive this calendar year. Once you’ve typed enough zeroes — and remember, with Vanguard Charitable, the minimum grant is $500 — click “Next“.

 

Vanguard charitable Confirmation

 

This page is your confirmation, which will be followed up with a letter you receive in the mail from Vanguard Charitable, and likely one from the charity itself. In my experience, the thank you / confirmation from the charity will thank you for your tax deductible contribution and advise you to retain the letter as a receipt.

Note that you cannot deduct your grants for a tax deduction. You only get to do that once, and that’s when you donate to the DAF. There is no additional tax benefit to giving from the DAF, regardless of what the Thank You letter irresponsibly states. Like a tortilla chip into seven-layer dip, there is no double dipping allowed.

 

Fidelity Charitable Giving

 

Last year, I opened my third donor advised fund, but only have two, since I no longer have any money in the T. Rowe Price DAF. Why did I open a Fidelity account? Fidelity Charitable allows you to give as little as $50 at a time, compared to Vanguard’s $500 minimum. The fees in both programs are nearly identical.

Opening the fund using a grant from Vanguard Charitable was simple. While you can start yours with as little as $5,000, you’ll be charged a minimum annual fee of $100 (from the fund’s value), which is a 2% fee when you carry the minimum balance. As mentioned above, you get more bang for your buck with a 0.6% fee at a balance of $16,667 and above.

The giving process with Fidelity is very similar to Vanguard, and is nicely streamlined. A new donation might take five minutes; giving to a previous recipient of your grant can be accomplished in a minute.

When you log in, you will be greeted with your balance, along with options at the top. I came to give, and so I click on “Grant.”

 

 

Fidelity Charitable Homepage

 

Next, you will see a list of charities which have been on the receiving end of your grants in the past. It’s not nearly as compact as Vanguard’s, but couldn’t be any easier to read. Perhaps Fidelity assumes (or knows) that many if its donors are of an advanced age where cataracts become an issue.

From here, you can fill in dollar amounts and add grants to previous recipients, or click the top button, “Add a new charity,” which is what I did.

 

After searching for Hearts & Hugs, the information was imported to this screen. Note that I opted to make the donation anonymous, an option that Vanguard and presumably every respectable DAF will offer.

 

 

At the bottom of the screen was an option to confirm and submit the grant.

 

 

I did, and received the following confirmation, which will again be followed up with an e-mail, letter, and likely a letter from the recipient.

 

That’s all there is to it! Both Vanguard and Fidelity make it simple to dish out your donated dollars. Subsequent donations are even easier.

I hope I can inspire a few more of you to consider giving in the most advantageous way possible. Not only can the tax benefits be tremendous, but a DAF can also save you loads of time when you do your year-end giving.

 


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24 comments

  • PoF, thanks for the great tutorial on DAFs! These are really cool and I was not familiar with them until I stumbled upon your site months ago. While I will not be opening one this year, you have definitely inspired me to open one soon.

    A DAF is now on my official financial to-do list!

    Have a great holiday and thanks for spreading the word on this great vehicle for charitable giving!

    • That’s great, Jon!

      Funding a DAF is generally a smart play for anyone who gives to charity, but especially for the FIRE crowd. Do the most good by funding it when your income and marginal tax brackets are at their highest, and your chosen charities will get the most bang for your buck.

      Have a Great Holiday!
      -PoF

  • Love the side by side comparison! As I mentioned on your original post, one of my longer-term financial goals is to be able to open a Vanguard charitable account. It’s nice to see exactly how the site works and how you distribute grants. Both look pretty straightforward and easy to use.

  • Very timely for us Doc. We opened up our DAF at Fidelity recently and those screen shots look mighty familiar. Thank you for being part of the inspiration to consider a DAF and emphasizing the easy steps to make it happen and give.

    Festive greetings to y’all over at PoF. Hope the boys have a blast on Christmas day (and mum and dad too!)

    Best,

    The PIE’s.

  • OrthoMD

    Add me to your list of readers who were inspired to open a DAF account after reading about your 100k donation. We are not at the 100k level yet but I had never heard of a DAF until your blog and am grateful for the resource. We won’t start distributing grants until the new year but it does seem like a great way to contribute meaningfully to charity while also budgeting or streamlining your donations. Thanks for the inspiration!

  • PoF,
    I wanted to say, first, thanks for writing up this post on DAF Giving.

    Secondly, thank you from the bottom of my heart for giving the Hearts and Hugs Foundation a donation. I am a 4th year medical student at the Medical College of Georgia and the President and co-founder of Hearts and Hugs.

    To anyone reading, our foundation’s mission “seeks to educate the community about the importance of preventative medicine and provide access to preventative healthcare.”

    We use 100% of our funds for our mission and do not take a single penny for “board salaries.” We will distribute the donations we receive to local clinics, people in the community, or just anyone we deem necessary of care. Our mission is broad on purpose– we really want to help those who can’t help themselves. That’s our motto!

    During this holiday season, I would love to kindly ask for a tax-deductible donation which can be made at our website or through our Facebook page.

    If you have any questions, please feel free to e-mail us at info@heartsandhugs.org .

    Thank you and happy holidays!

  • Thank you for going through the ins and outs of this! It doesn’t make sense for us to do regular charitable giving yet, since we’re still in debt, but I do like planning our options for once we achieve FI.

  • What an interesting look behind the scenes! I too have added starting a DAF to my 2017 finance goals thanks to Frugalwoods, TJ, and your posts in the past weeks. You have started an awesome trend here and I can’t wait to see how much further it stretches! 🙂

  • PathMD

    Thank you for the inspiration PoF! I too set up my DAF for 2016 at Vanguard. Since this may be my last high income year it made sense to do so now. I look forward to making my first charitable contribution from the fund in 2017. I am involving my teens in this with the hope that they will continue this new tradition. I have really appreaciated your articles this year and look forward to reading more in the new year. Happy holidays!

    • That is awesome, PathMD!

      My boys aren’t quite at the age where they would understand much of this, but they already have a Save Jar as part of their weekly allowance. They are also named as designees to disperse the funds from our DAFs in the event of our passing.

      Happy Holidays to you and family!
      -PoF

  • TJ

    POF, thanks a bunch for sharing my post!

    I love this tutorial and love that you pointed out some of the convenient non-financial aspects of giving through a DAF, like the ability to stay anonymous and not needing to keep track of the records of all your individual donations for tax deduction purposes.

    It’s super clever to utilize Fidelity to get around the Vanguard higher-grant limit and such. I probably will just stick with Fidelity unless I have some reason to open one at Vanguard in the future. (Vanguard funds with massive gains)

  • It’s the least I can do, TJ. Your gift was a generous and wonderful thing.

    I would stick with just the one. You could always donate Vanguard funds, or any other asset, to the Fidelity DAF. If I had done my homework, I would have only Fidelity (or Schwab, which I hear has similar fees and minimums).

    Merry Christmas!
    -PoF

    • Joe

      I’m one of the readers whom you inspired to open a $100k+ DAF… the stock I donated actually appreciated another 15% between me filing the paperwork and the actual date of transfer/sale. I opened it at Schwab, and can confirm that Schwab also has a minimum gift of only $50.

  • Over time, I’ve become more of a fan of Fidelity over Vanguard. Their website interface is slightly more friendly, they now have good options for low ER index funds, and according to your post, the minimum donation require is lower for Fidelity than for Vanguard.

    Good to get the generosity ball rolling for us all. I’ll probably start with a Fidelity Charitable, and grow it over time. One day, I can ball it like PoF with a six-figure donation! 🙂

  • Thanks so much for the great overview of DAF giving. While I clearly won’t make the cut off line for 2016 I will definitely start the paper for 2017 to create a DAF.

    After reading these seem like no brainer!!!

    Thanks for sharing!!!

  • Question, If I’m adding $10,000 more to my DAF this year, would it be best to donate shares of my index funds (that have appreciated) and then use the cash to go buy more of the sme index fund, this raising my cost basis?

    • Yes!

      It’s basically a tax-free way to Tax Gain Harvest. I’m assuming you’re in good funds that are tax-efficient if you’re planning to keep them. In that case, it might be worth waiting until later in the year to donate. If the market is up (as it will be ~70% of the time on average), you would have the opportunity to eliminate a larger gain.

      I donate to my DAF towards the end of the year, but a few years ago, I donated early when I decided it was best to get out of some suboptimal (not tax efficient) funds rather than take the capital gains and dividends throughout the year.

      Thank you for your generosity and comment!
      -PoF

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