Creating a donor advised fund with the Vanguard Charitable Endowment Trust was one of the best philanthropy decisions I’ve made in the last couple of years. Why? It has dramatically reduced the time and effort required for me to make donations of appreciated securities.
In general, giving shares of appreciated stock is incredibly tax-efficient because you eliminate paying taxes on the capital gain, but it can be a hassle. The nonprofit must have a brokerage account and then you (the donor) need to get your brokerage firm to transfer the shares. It also takes extra effort to make sure the charity knows where the transfer came from, and since most charities get relatively few stock donations, I often found getting a correct acknowledgment of my gift for tax purposes required extra effort. As a result, I gave appreciated stock only when I was making larger multi-thousand dollar donations.
The donor-advised fund lets me make a single large donation of an appreciated stock, whenever I want. In my personal example, I know the staff at Vanguard handles this type of transaction all the time, so they make sure the transfer happens as I’ve requested, and I always get an immediate acknowledgment of the gift. Vanguard automatically sells the security and credits my charitable fund with the proceeds, which are then invested in the investment vehicle of my choice. To request grants to organizations I want to support, I just go online and put in a request. If I’ve given to the organization before, there is virtually nothing I need to enter other than the amount I’d like to see donated. Once reviewed and approved, a check is sent to the organization with information that lets the non-profit know that I have provided them a grant. It couldn’t be easier!
Its better for the nonprofit too because:
1) They get a donation in cash and don’t have to deal with the effort and expense of selling the donated stock.
2) I give more. Why?
Two reasons: The minimum grant request is $500, which is often more than I might otherwise have given the organization. I’ve also found that because I don’t have to decide which specific charities I want to support when I donate the stock, I am more comfortable giving a larger block of stock. I’ve found that once I’ve made the contribution to the fund, I tend to make more gifts, partly because it is so easy and partly because I feel why not put the money to good use, rather than just letting sit in the donor advised fund.
So if you are philanthropically-oriented and have appreciated assets, particularly stocks, I highly recommend creating your own donor-advised fund. I also encourage non-profits to promote donor-advised funds to contributors that have given, or expressed an interest in giving, appreciated assets. It will make the process easier for you and the donor, and I’ll bet will ultimately result in more donations to your cause.
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