When you donate appreciated assets like stocks, ETFs, and mutual funds, you’re giving in a highly tax-efficient way, which is best for both you and the recipients of your charitable giving.
Donating assets directly to individual charities, however, can be difficult, especially when dealing with smaller organizations, and good luck doing so anonymously.
One solution is to open a donor advised fund (DAF), but as much as I like these giving vehicles, they generally have various fees to pay and minimums to abide by once you’ve opened an account. It’s a long-term relationship.
Recently, I’ve discovered a new species of DAF that has no fees, no minimum balance, and is the perfect option for someone looking to unload an appreciated asset and give the proceeds to one or multiple charities anonymously.
Charityvest Basic is an ideal solution for simple, no-cost, anonymous giving.
Why Donate Appreciated Assets?
The Internal Revenue Service rewards charitable giving for anyone whose itemized deductions (which include charitable giving and other deductions) exceed the standard deduction.
If your donations add up to hundreds of dollars, you’re most likely taking the standard deduction. If your donations add up to tens of thousands of dollars, you’re most likely itemizing deductions. If you’re not sure whether you’re itemizing deductions or not, take a look at last year’s 1040 and do some quick tax planning for the current year before December 31st.
For itemizers, once your total itemized deductions equal the standard deduction, every dollar donated to qualifying charities will reduce your taxable income by $1, reducing your federal income tax at your marginal tax rate. If you’re in the 32% tax bracket or higher, as many high-income professionals are, you’ll save at least 32 cents in taxes for every dollar donated.
When you donate stocks, bonds, or funds that appreciated in value, a nifty thing happens. As long as you’ve held the asset for at least a year, you can deduct the current value of that asset, the charity keeps 100% of the proceeds, and no one needs to worry about paying capital gains taxes. They just disappear like that 33-0 lead the Colts had over the Vikings at halftime.
Donating appreciated assets rather than cash allows you to eliminate potential future capital gains taxes.
Ideally, you’ll choose the assets that have the largest percentage gain when deciding which of your assets you’d like to part with. If you don’t want to change your asset allocation, I still recommend donating your high-flying stock and replacing it by buying more with cash or cash flows as you see fit, effectively raising your cost basis significantly without changing what you own in your investment portfolio.
I’ll note that when donating appreciated assets, you’re limited to deducting 30% of your adjusted gross income from those donations. If you exceed that amount, unused deductions can be carried forward to future tax years. In years that I fund our DAF, I try to donate close to 30% of our projected AGI, but if I go over, I’ll still get the deduction as long as I itemize again the next year.
Why Donate Anonymously?
While it can feel good to get credit for your good deeds, your mail carrier will thank you for making many of your donations anonymously.
When you make a donation in your name, with your address (and possibly your phone number), you will be on that charity’s mailing list and call list for life until you kindly ask that they stop inundating you with requests for more money fortnightly.
Having sent $100 grants to some 500 charities as a part of our Giving Tuesday efforts in recent years, I’ve been careful to select “anonymous” giving each time, but it became apparent that I messed up at least a couple of times. I know because I get newsletters and appeals in the mail quite often from charities that I’ve only given to as requested by readers.
The anonymous gift accomplishes your primary goal — the charity receiving the donation — and keeps you from being continually asked to give more.
Why Not Open a Standard Donor Advised Fund?
I’m not saying that you shouldn’t open a more traditional donor advised fund. I think they’re great, but a DAF is not for everyone.
I think of ours a mini-foundation, an endowed fund that we use to donate 5% to 10% of its assets annually, carrying a large balance so that we can continue to give when we no longer have income. The money should last well into our retirement, especially if we dial back to giving 5% or so when I no longer have earned income.
The primary downside of a typical donor advised fund are the fees. There are admin fees (0.6% annually is most common), and there’s typically a minimum annual admin fee of $100 or more. Now, if the money were still in your brokerage account, you’d have tax drag that could equal or exceed those fees, so the admin fees are not such a bad deal, but they’re certainly worth mentioning.
Charityvest Invested, which is where > 90% of our DAF money is now, has reduced fees of 0.45% or less and a minimum admin fee of only $48. If you are interested in a “standard” donor advised fund where you maintain a balance and invest it, I think this is a great option.
If, instead, you just want to make anonymous donations and do not plan to carry a balance long-term, Charityvest Basic allows you to do so with zero fees. Donate your asset, choose a charitable recipient (or dozens of them), and make your grants. You’ll have the option to share as little or as much of your contact information as you wish with each recipient.
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Downside of Charityvest Basic
The primary downside is that if you choose to carry a balance in the DAF, it cannot be invested. It will remain in cash, and the balance will lose purchasing power due to inflation.
That’s why I believe it’s the best option for someone who wants to make a one-time donation or part with a single appreciated asset, giving all of the proceeds away.
It’s a great option for the one-and-done giver, but those looking to establish a lifelong giving vehicle should consider paying the lowest-in-the-business fees for a Charityvest Invested DAF account. I can also recommend Fidelity Charitable and Vanguard Charitable (I use both), especially if you already have a taxable brokerage account with the affiliated company.
The Human Fund
On a somewhat related note, you can now give virtual Charityvest gift cards to your friends and family. These are charitable gifts to be given by the recipient to the charity of their choice.
You fund the gift cards with your balance, and others choose where the charitable dollars go.
This novel idea reminded me a bit of George Costanza’s supposed grants to “The Human Fund” on the behalf of his coworkers as a ruse to avoid buying them gifts. In this case however, you can actually make a donation on someone else’s behalf, and that person gets to select a legitimate charity to receive the money.
Best of all, since you funded the gift (with cash or appreciated assets), you get the tax deduction.
While I realize that these offerings fill a narrow niche, and almost no one will read this because almost no one reads charitable giving content, I hope this helps the select few looking to anonymously donate appreciated assets or to give the gift of charitable giving.
For additional information on donor advised funds and charitable giving, see our growing list of articles:
8 thoughts on “A Fee-Free Way to Anonymously Donate Appreciated Assets”
I’m another reader/encourager to ask you to please keep the info coming on giving options. I read your posts regularly and have used your info to facilitate transfers from Vanguard’s to Fidelity’s DAF (for the lower minimum grants available there) and suspect at some point will move assets from both of their DAF’s to Charityvest for the lower fees mostly due to your making the info available and accessible. I don’t see the topic of giving covered as well anywhere else, especially for the PoF readership. Thanks and please keep the info coming. We may be fewer in number than your general readership, but we may need/use the info even more.
Thanks for letting us know about this, Leif. It is super helpful for those of us who “give/donate” then “advise/designate” immediately.
One thing I would quibble with is your choice of words regarding “giving” later. We are giving/donating now. That is why we are getting the tax break now. Later we will be “advising” (hence, “donor advised fund”) who gets the gift and appreciation/dividends/etc, but we “give” in the tax year that the money passes from us to the fund. Later, the fund is giving, and we are just advising the fund. I think this is one of Jim Dahle’s observations as well.
Don’t mean to sound harsh – I am a huge fan of giving whenever and designating whenever. I am a slightly bigger fan of giving now and designating/advising now, but still think any gift is good and is totally your choice.
Love your site. Keep up the great work. And please keep writing about giving!!!
Thank you for sharing this. I am in the minority that tends to read more of the giving content than anything else, because there is a lack of good information out there. I think I first learned about DAFs from you several years ago, and it opened up the possibilities of being able to give while also maximizing tax deductions!
Your article was timely! We are doing a large Roth conversion, and contributing to a DAF will offset some of the taxes owed on that conversion. Thanks for the info on CharityVest!
thanks for the insight, I hope to convert to Roth IRAs in the future.
A few of us read! I’m a traditional DAF holder (Schwab) but am always interested in what else is out there.
“almost no one will read this because almost no one reads charitable giving content”
Almostnoone here to thank you for your information about better ways to give. Maybe more of us than you think. Just quiet types
I appreciate the feedback, Debi, and am very glad to see you’ve read to the end.
It’s the email click rates and pageview stats that tell me you’re in the minority, but I’m not about to stop writing about giving because I think it’s important and something I’d like to encourage people to include in their retirement planning.