The White Coat Investor, explores two of my favorite things: lowering taxes and how to donate to charity. Of course, the two often go hand-in-hand, giving charity a high priority in our household.
Whatever your motivation, I applaud you for supporting charitable causes. I have given a significant percentage of my income toward charitable causes, and I think the act of giving not only helps others, but helps me to be a better person.
There are many downsides to using a donor-advised charitable fund. The first is that you can only recommend donations to qualified 501(c)(3) charities.
The second downside is that investments are a bit limited. Vanguard’s offering, for instance, is composed essentially of Admiral shares of its popular index funds.
Another option is to start your own private charitable foundation. This requires a much larger donation ($500,000 is often suggested) to make it worth the additional costs .
One way to combine a charitable impulse with an estate planning tool is to use a charitable remainder trust (CRT). With this type of trust, you put in a lump sum and take a tax deduction on it.