At the end of 2007, I contributed $5,000 to a Fidelity Charitable Gift Fund that I created for myself to distribute to non-profit organizations later, once I selected a cause to support. This was a case of really bad timing; since then my account’s value has dropped 6%. Suddenly, I have $300 less to donate to charity. While I am receiving the tax deduction for the full $5,000, unless my account increases at least 6.4%, organizations won’t benefit from the full amount I donated.
I think I need to examine my allocation strategy in the Charitable Gift Fund. Perhaps I should keep the amount I intend to distribute in the coming year in a money market fund within the account, while everything else should be invested for the longer term in a broad stock index fund.
Subscribe
3:42 pm (reply)
I think you should treat it like any investment account except that instead of selling you will donate it, so perhaps this 5000 should what you plan to donate in 2009? That way you don’t let these swings affect you.
5:29 pm (reply)
Was this a one time, this year only contribution? If you distribute the funds now, you have missed out on a potential tax loss, and the charity that will still benefit from you contribution benefits a bit less.
I agree with Jim. Don’t be in a hurry to distribute the funds. Let it build a bit. Make another contribution next year. See where it is then.
7:00 pm (reply)
It was a last year contribution, actually. It’s a contribution to an intermediary fund I set up at Fidelity, so I got the deduction for the full $5,000, even though it hasn’t been “granted” to an organization yet. When I made the contribution, I had the option of a money market fund or a variety of mutual funds. I chose the S&P 500 fund. Knowing that I intended on distributing the full $5,000 within the year, I should have invested that amount in a money market, more friendly to short-term holding.
I believe I have a solution that makes sense. I’ll just leave this $5,000 in the account to grow over the long term, but I’ll contribute more to the fund this year, with the intent of distributing that contribution instead.
7:09 am (reply)
I think that solution makes sense, let the $5k go perhaps until next year or even farther down the road. Ultimately you want the funds to appreciate (otherwise you would’ve contributed directly to the charity!) so give them some time.
You might want to forgo contributing to the fund in the first place for short term contributions.
3:22 pm (reply)
Right, if the plan is to distribute the funds with the year, there is no benefit to using the Fidelity intermediary. Do you intend to make the donation anonymous? That would be one benefit. Otherwise, just send a check off to your charity of choice.