Giving away money for fun and profit

Next year I will be required to withdraw RMDs from my IRA. I live in a high tax state so there will be a large tax bite. Instead of giving it to the government, I am looking into donating to charity.

I have been researching this and as with all tax topics it is complicated. I am starting this thread so we can share information resources: books, online articles, etc on topics like:

Charitable remainder trusts
Donor Advised funds
Setting up my own foundation or charitable trust.
Qualified charitable distributions

I will update the wiki post with any information posted.

This is an automatically-generated Wiki post for this new topic. Any member can edit this post and use it as a summary of the topic’s highlights.

Good thread re. starting a foundation at Bogleheads:
Starting a family foundation

To kick this off, here is a book I have been reading:

Managing Foundations and Charitable Trusts: by Roger Silk and James Lintott
Amzn B005C778BU

Decent, down to earth book that gives me some confidence that I may be able to set up a charity without spending $$ on lawyers. I am not saying I will do it but it would be great to be able to target issues like education that are important to me.

Kind of expensive though, $32

I am not familiar with the scenario you have laid out (a couple of decades out for me…) However, I can recommend Fidelity’s DAF: very easy to setup, easy to make grants (donations) and minimums are fairly low. I set one up in December due to the tax law changes. Very happy so far.

I did the same as gremln007 and set up a Fidelity DAF in December due to tax changes. They are not the least expensive ongoing, but most flexible especially in the amounts of grants you can make.

Having said that, it may be best to note you cannot make a qualified charitable distribution to a DAF.

If you have investments in a taxable account as well then donating appreciated stock may be better than a QCD, unless you’re below the standard deduction threshold. Donating appreciated stock works with the DAFs.
Donating appreciated stocks also works for those of us under 70 1/2.

Could you remind me of the purpose? Is this because you would not be able to deduct your regular charitable donations starting in 2018, but you could deduct a single huge contribution to the DAF in 2017 and plan to make your future small charitable donations out of that DAF?

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On an ongoing basis, someone could also use a DAF to bunch deductions every other year +standard deductions on alternate years), along with paying property tax every other year if their state allows. My state’s property tax can be paid Dec 1 through Jan 31, so you can choose to pay for two years every other year and take the standard deduction on the alternates.

Another beneficial DAF usage would be donating appreciated stock to charities that aren’t set up for receiving stock directly.


Ah, that old trick. Gonna be much less useful with the SALT limit now.

My one problem with the Fidelity DAF is the ongoing fees / expense ratio. I think it’s very high, setting us back a decade to a time before sub-0.1% expense ratio index funds and ETFs. I realize the DAF is more like a managed fund, but the reality is that it’s self-managed and otherwise run by machines. At least from my understanding. It’s just a cash cow for Fidelity (and other providers that charge a similar fee).

Good point. Sales and property tax for me X2 would be ~$14k. I will be itemizing myself every year for the foreseeable future. I’ve never done the alternate years although I could have once. Last year my property tax mortgage and sales tax alone just barely exceeded standard deduction. Then I have a growing margin interest along with charitable deductions that actually get to be deducted.

The daf for alternate or multiple years doesn’t have a $10k limit.

This article focuses on (Qualified Charitable Deductions) QCDs for those like me who will need to do (Required Minimum Distributions) RMDs but also points out how the new tax law will affect charitable giving:

CQDs:Get More from RMDs

It points out that the cap on deductions for state and local taxes and the increase in the standard deduction makes it harder to get a tax break from charity giving. You need to take these into account for your tax planning.

The tax law changes make a QCD even more valuable if you qualify i.e. It is only available to IRAs and individuals who have reached RMD age (70.5).

In that case, it allows you to transfer up to $100,000 per year from your IRA directly to a qualified charity. It is not taxed and counts toward the RMD.

The article goes on to discuss the mechanics of donating part of the RMD as a QCD.

This is something I definitely want to read more about.

QCD requirements

obtaining the tax benefits for doing a QCD from an IRA to a charity requires meeting very specific requirements, including a minimum age limitation (70.5) , a maximum dollar amount limitation $100K, and contributing to only certain types of eligible (public) charities (rendering private foundations, donor-advised funds, and split-interest charitable trusts all ineligible).

In addition, there is the most stringent requirement – though also the easiest to satisfy – that for an IRA distribution to qualify as a QCD, the check cannot be made payable to the IRA owner and instead must be made payable directly to the charitable entity (though the check payable to the charity can be sent to the IRA owner and forwarded on to the charity).

What is a public charity?
IRS definition

A private foundation is any domestic or foreign organization described in section 501(c)(3) of the Internal Revenue Code except for an organization referred to in section 509(a)(1), (2), (3), or (4). In effect, the definition divides section 501(c)(3) organizations into two classes: private foundations and public charities.

Generally, organizations that are classified as public charities are those that

Are churches, hospitals, qualified medical research organizations affiliated with hospitals, schools, colleges and universities,
Have an active program of fundraising and receive contributions from many sources, including the general public, governmental agencies, corporations, private foundations or other public charities,
Receive income from the conduct of activities in furtherance of the organization’s exempt purposes, or
Actively function in a supporting relationship to one or more existing public charities.

Private foundations, in contrast, typically have a single major source of funding (usually gifts from one family or corporation rather than funding from many sources) and most have as their primary activity the making of grants to other charitable organizations and to individuals, rather than the direct operation of charitable programs.

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Bend3r writes

On an ongoing basis, someone could also use a DAF to bunch deductions every other year +standard deductions on alternate years), along with paying property tax every other year if their state allows.

I can see that makes sense. According to:

A donor-advised fund, or DAF, is a philanthropic vehicle established at a public charity. It allows donors to make a charitable contribution, receive an immediate tax benefit and then recommend grants from the fund over time. An easy way to think about a donor-advised fund is like a charitable savings account: a donor contributes to the fund as frequently as they like and then recommends grants to their favorite charity when they are ready.

Exactly. With the tax law changes as well as a shift for me away from W2 income, it appeared unlikely that I would ever itemize again. Thus, I front loaded all my charitable giving dollars into 2017, to last me until I could do QCDs.

The donation to the DAF was from the investments with highest gains in my taxable accounts, much of it that has been building over decades.


I will likely do this as well. Every 2 years as you indicated.

Valid complaint. Seems like you can minimize by only leaving funds in it for short durations. But the difference between not being able to deduct and full deduction can be significant. For 25% marginal, 10% cap gains and ~2/3 of the donation as gains, the benefit is over 50%. I can provide an example if helpful.

Oh no, I understand that it is of great benefit to the donor. I also understand that there may be expenses associated with running the DAF accounts. I just don’t believe the expenses are as high as what they are charging, and considering that the entire point of it is charity, they should run it at or close to cost (price gouging just makes them money grabbing opportunistic assholes).


Jcohen - good article, just saw it. There were a number of examples of making your charity pay you, often to the tune of 6-7 figures/year.

A mutual-fund manager earned nearly $5 million over eight years from a lucrative side gig. He was trustee of his business partner’s private charitable foundation.
Another charitable foundation, set up by a carpet merchant, has millions of dollars in loans outstanding to the man’s carpet company.
A third paid out more to companies owned by the foundation president’s family than it gave to charity in a recent year.
All these transactions were lawful, the foundations said in their tax filings.

Seems like you can do clever things like donating business debt to your foundation, allowing both a deduction and keeping the capital working in your business. Another point was that the self dealing rules seem to have omitted siblings from the list of disallowed relatives.


Good thread re. starting a foundation at Bogleheads:
Starting a family foundation

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