A Good Way to Give Back

It looks like Black Friday was a dud, I hope that Small Business Saturday was successful and I trust that Cyber Monday was largely ignored here in the office.

Last year, Marie Tustin apprised me to Giving Tuesday, which always follows the aforementioned ‘holidays’ but is dedicated to giving back instead of getting good deals.

Even if you don’t have specific plans for Giving Tuesday, this is the time of year when charitable giving comes to mind and last year I took the opportunity to write about Donor Advised Funds (DAF).

The basic idea of a DAF is that you consolidate your giving to the DAF and then request that the DAF make grants on your behalf.  So, I give money to the DAF and then request that they make payments to the charities of our choice.

When I signed up, I did it mostly to reduce the amount of paperwork that we have at tax time.  Our return isn’t all that complicated, but there were always a lot of letters for our charitable contributions – even if they didn’t amount to very many dollars – a $5 donation got a letter the same length as a much larger donation.

I didn’t realize that the DAF would change how we give.  Previously, we gave on a relatively ad hoc basis, meaning that my alma mater would send a letter and we would make a gift.  Then the church would send an appeal and we would make another gift.  We weren’t very proactive or even organized (which I don’t like admitting).

That’s all changed because when you log onto the account, it shows all of your grants to the charities and then some graphs that summarize the information (and you know I love graphs).  I can see instantly how much we gave to the DAF and how much has gone out, not just this year, but for the past five years (which doesn’t apply just yet, but will).

We can see our top five donors and what we’ve given, the type of charity that we give to (religious, education, arts, social services) and how the remaining balance is invested.

Seeing these charts sparked some nice conversations between me and my wife about what’s important to us.  The first step was setting up a budget for how much we wanted to give away.  It was easy to devise after looking at one years’ worth of actual giving.

Then, we started to actually make decisions about where we wanted to give.  Instead of responding to pleas in the mail throughout the year, we determined that we were giving too much to a few places that we didn’t care much about and wanted to give more to another few places that we really care about.

When tax time comes, I’ll be a lot happier with one report that with just two (what came in on one page and what went out on the other) instead of the pile of junk.

We donate appreciated securities (stocks, mutual funds, ETFs) to the account, which is a cinch and more tax efficient than just giving cash.  The report from the DAF shows the Fair Market Value (FMV) for our contributions so that we don’t have to lift a finger trying to find that or getting the delivery instructions for multiple charities.

Some critics have complained that too much money is going into the DAFs and remaining in the account instead of being distributed to charity.

Right now the money could stay there in perpetuity, but at least one Congressman is pushing to have a five year limit so that any money contributed to the DAF has to be granted in five years.  Of course, who knows what Congress will do, but there could be some changes on the horizon. It’s impossible to know.

We’re not big time givers trying to create a dynasty, so if that law came to pass, it wouldn’t effect anything for us – we would still benefit from the reduced paperwork, contribution efficiency, the fact that we’re always fully invested and most importantly, the conversations that we now have thanks to the reporting.

If you’re interested in learning more about a DAF even after Giving Tuesday passes by, let us know and we would be happy to help.

Happy Giving Tuesday!