Jim Dahle explains how donor advised funds work and why they're useful for charitable giving. You get an immediate tax deduction, can invest the money tax-free, and donate to charities whenever you want. He also recommends specific providers.
Donor advised funds.
And these are pretty cool. I'm actually, you know, people sometimes ask, what's one thing you've changed your opinion.
About over the years?
And this is my usual answer. Donor advised funds. You know, when they first came out or I first learned about them or whatever, I didn't like the fact that people could get the tax break for contributing to a donor advised fund, even if the charity never gets the money. But I've learned to get over that somewhat. I do think some people with big.
Donor advised funds ought to give a.
Little more to charity each year, AKA the jerk move. But they're so convenient that it's hard for me not to use them for my charitable giving. The beautiful thing about it is it's even easier to donate shares of appreciated stocks and mutual funds, that sort of a thing, to a donor advised fund.
Than it is to donate them directly.
To charities because the donor advised fund expects them. You can basically have your donor advised fund at the same company as your brokerage account and it makes it really easy to donate appreciated shares.
Remember, when you do that, not only.
Does the charity not have to pay capital gains taxes, but you don't either. And you get the entire value of what you're donating as long as you've owned it for at least a year. And as long as it's a publicly traded company or mutual fund, you get the entire thing as a charitable deduction.
So they're really convenient that way.
Plus, you might only have to make that transfer once a year. So instead of keeping track of every little receipt every time you give something to charity, you only have to keep.
Track of one thing.
And that makes it way easier.
You've got this great record when it.
Comes time to do your taxes. But my favorite benefit of a donor advised fund is it has eliminated charity.
Porn from my mailbox.
And if you don't know what a charity porn is, you ought to give a little more money. The full size, you know, magazine essentially in your mailbox. And you will continue to get one every few months for the rest of your life because they use about 10% of the money they raise to try to raise more money. And most charities are like that. In fact, many charities actually raise more money by selling your name to and mailing address to other charities. So if you decide you donate to 10 charities directly one year, you will have something from a charity every day in your mailbox for the rest of the year. And I call that charity porn.
I mean, it's obviously not pornography. A lot of it's actually really kind of, you know, inspiring.
That's the whole point of it, is to inspire you to give more. But it seems like a waste.
I want my money to go to.
Whatever the charity's actually trying to accomplish. I don't want it to be used to market to me to raise more money. So the benefit of the Donor Advised fund is when you make a donation from it, you can check. I want to be anonymous.
And then you are.
They don't have your address, they can't send you charity porn, they can't hassle you, they can't call you, they can't do anything. And you still get your charitable deduction. And all of your money gets to.
Go toward helping the charity. So I love that aspect of a donor advised fund. Totally encourage you to use one if.
You donate any significant amount to charity. Vanguard has one. The downside of the Vanguard one is they have a $25,000 minimum to start it. I think additional contributions have a minimum that's like $5,000 and your actual donations from the fund have a minimum of $500. So if those numbers don't work for you, you probably want to use something different. Fidelity has one that's pretty well thought of has much lower minimums. Dafy D A F F Y is.
One that I've been impressed with lately. We had their CEO on the podcast not that long ago, but they have some pretty darn low fees and hopefully will become more and more popular as time goes on. But you might want to look into those if the Vanguard numbers are just a little too high for what you want to do with your Donor Advised fund.
The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.
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