I'm recently retired, living on Social Security and distributions from my IRA, and own my house free and clear so that I don't have sufficient deductions to itemize on my tax return. I'm a philanthropic person, but for the first time in my life, my contributions are not tax-deductible.
I am aware that Fidelity, Vanguard, and others have donor-advised investment funds. Fidelity's is called the Charitable Gift Fund. Apparently, you can donate to the fund, which is a recognized charity, and choose among several investments to receive the funds. Then, you can set up periodic or one-time gifts to the charitable organizations of your choice.
The tax advantage seems to come if you donate several years' worth of contributions at once, so that the total is large enough to substantially exceed the standard deduction.
Scott Burns has written about Fidelity Charitable Gift Funds several times, the latest at:
If you are taking RMDs from your IRA, you have just this month to donate directly from the IRA. See my article describing this:
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I also use the charitable fund, for a reason other than grouping the donation for a deduction. A long term cap gain can have a phantom rate of 22.5% due to AMT. I had a stock with a $2000 basis that was getting taken over for $10,000 (total cost/sale). That would have been $1800 in tax. By donating the $10,000 worth of stock, I got the tax write off of the full $10K, and then was able to break it up into the individual donations I wanted to make. In your case, the fund allows you to jump over the standard deduction every few years. Keep in mind, you may want to do this with property tax to the extent you can. When I was in a similar situation, I paid Q4 late one year (1.5% late fee) and then paid ahead 2 quarters, the town was happy to take my money in advance. That may help your cause. JOE
That's one potential use for them. It's also great, similarly, if you're going to be in a higher tax bracket one year but not in another - make the donations in the high tax year, make the distributions anytime you like without needing to think about tax implications. Also very nice right now - year end - to be able to make donation fast and at once rather than scrambling to contact various charities, make sure each sends you appropriate receipts, etc. A *huge* convenience.
Other additional advantages: if you want to donate appreciated stock and avoid cap-gains taxes, way *way* easier to do it once and then use the gift fund to distribute the proceeds to more than one charity. And if your appreciated stock is in a Fidelity account (assuming you are using the Fido Gift Fund), making the donation could hardly be easier - point and click and it's done in a few moments.
Further: grants you authorize from the fund may be made either anonymously or without your contact information (ie. no address) if you like. You don't need any contact from the charities themselves because you no longer need a receipt from them (the Gift Fund will have given you one!). If you want to give gifts but not have to receive mountains of additional solicitations from the charities, this may help a lot.
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We've been very pleased with Fidelity's program. The biggest improvement I'd like to see them make is to lower the threshold for additional gifts to the fund. Right now you can open an account with a $5000 gift, but additional contributions have to be over $1000 each. Not necessarily a big problem if you generally make a big contribution once or twice a year (especially of appreciated assets) but it's still a pretty big hurdle for many folks.
Overall, we love it.
Here's a recent article which talks about these and some of the tax issues:
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And here the Fund is discussed by Dartmouth economist and blogger Andrew Samwick:
What's your tax bracket? And how much would a tax deductible charitable contribution mean to your tax situation? I think if you do some calculation you may come to the conclusion that it isn't that big a deal.
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