Comments on: Small-Time Philanthropy: The Charitable Gift Fund

By: Flexo

Flexo — Fri, 11 Jan 2008 15:28:01 +0000

2mil: That’s a valid concern. The way I chose to look at this is in comparison to my income rather than net worth. My monthly net income has been hovering around $5,000, even with large expenses in the second half of 2007. A contribution of $5,000 puts me back about a month (though more if you figure in lost interest or gains) so its effect on my cash flow is not significant at the moment. It’s true, when I decide to put money down for a house, I will have $5,000 less than I would have otherwise (offset minimally by the charitable gift tax deduction), but I still think it was the right move.

By the time I’m ready to buy a house — who knows when I’ll be settling down — I should have enough cash that $5,000 won’t make too much of a difference. I could end up regretting it and missing the $5,000, but if I do, you’ll read about it here.

By: 2million

2million — Fri, 11 Jan 2008 07:06:38 +0000

Hey Flexo,
I really admire this move on your part!

However, let me play devils advocate for a minute — if you contributed what appears to me to be a sizable amount – about 4% of your existing net worth (~$5,000) to this chartiable gift fund, how does that affect your personal financial security? Do you seeing this impacting future plans (ie saving for a house? retiring early?, dealing with emergencies, etc)

By: jason

jason — Mon, 31 Dec 2007 19:20:03 +0000

I’m in debt, 20,000 over a student loan which has defaulted several time’s. I didn’t get the education that I needed, for a career in welding and blueprint reading. So i can’t get a job in this field and would like to go back to school for psychology so i can help people who are addicted to drug’s and or alcohol and help them make a change in their lives. Someone please help.
Sincerely, Jason..

By: jim

jim — Fri, 28 Dec 2007 13:02:50 +0000

I think this is a great idea! I might do this next year, gives you a lot more flexibility.

By: Leanne Bryan

Leanne Bryan — Thu, 27 Dec 2007 20:18:42 +0000

To teach our kids about charitable giving priorities, we bought them Give Cards this year.

They are really enjoying discussing with each other the changes they can make with the amount they give (10% of the card).

By: Flexo

Flexo — Thu, 27 Dec 2007 16:52:31 +0000

Bob: It's good to hear from someone who has this account. Thanks for clarifying/correcting the fee I listed above; I've updated the article to include the correct amount. I should also note the fee percentages for the Fidelity account decrease as your account balances grow. They're outlined here. Thanks also for bringing up the issue of naming a successor.

By: Bob

Bob — Thu, 27 Dec 2007 16:29:10 +0000

I’ve had an account with Fidelity for about a year now, and so far am pleased. My giving consists almost exclusively to my church.

One correction, the annual fee charged by Fidelity is $100 or 0.60% (not 0.06%) – whichever is greater. The underlying expenses charged by each fund are included in this calculation. Thus, if your balance is $50,000 and the underlying expense ratio of your chosen funds is 0.7%, you’d implicitly incur $350 of fees throughout the year and thus incur no explicit line item expense on your statement. Similarly, if you invested $10,000 and the underlying expense is 0.3% ($30) – you’d be billed an additional $70 on your statement once per year. For me, I contributed about $10k in Feb. ‘07 and saw a $19.31 “Annual Administrative Adjustment” on my June statement. This fee was pro-rated given my account had only been open a couple months. Since I’ve donated roughly half that balance, I’d estimated the fee charged this coming June will be around $75.

Some would say that’s expensive, but the tax savings outweigh the cost significantly, not to mention the convenience factor involved in setting up a recurring gift that Fidelity automatically mails the the recipient – no work required by me. Also worth considering is all gains on assets invested in the fund are tax free, given they’re not technically your assets any longer; although you’re got exclusive discretion – to 401c3 organizations – to distribute the proceeds.

It’s also worth mentioning the importance of designating a successor. Similar to a beneficiary, the successor will “inherit” your control of where the assets are distributed. Without a successor, the assets are absorbed by the gift fund and allocated as deemed appropriate by the board of trustees. I’m sure they’re fine folks, but I don’t want a bunch of wall-streeters giving away my donation. At this time, I have a family member as primary successor, with my church as a contingent successor.

By: Flexo

Flexo — Thu, 27 Dec 2007 15:58:31 +0000

Red: You only get to deduct the value of your initial contribution into the fund. If you donate securities, you don’t have to include the gains as part of your income, so that is a benefit. Any further gains on the assets once held by the fund no longer belong to you, so you won’t be taxed on that. Once the assets are held by the fund, you won’t get any more deductions, even when you grant a portion of what’s held in the fund (initial contribution or gains). So yes, the gains are just bonus.

By: red

red — Thu, 27 Dec 2007 15:29:49 +0000

I’m confused. So when you do donate the money, do you get to deduct the gains as well? I thought that was the point of donating appreciated assets.

With this, it looks like the donation has already been made and deducted, so the gains are just bonus.

By: The Saving Freak

The Saving Freak — Thu, 27 Dec 2007 14:35:25 +0000

Great idea. We give directly to the salvation army and our local church. Both have proven to do great things with the money and are highly efficient with the money raised.