Donor Advised Funds Vanguard: Understanding the Process and Impact

Donor advised funds are a type of charitable giving vehicle that allows you to make a donation and then recommend grants to your favorite charities over time.

Vanguard offers a range of investment options for donor advised funds, with over 200 portfolios to choose from, including socially responsible and income-focused options.

The process of setting up a donor advised fund with Vanguard is relatively straightforward and can be completed online or over the phone.

By using a donor advised fund, you can potentially reduce your taxable income by deducting the full amount of your donation in the year it's made, rather than the amount actually distributed to charities.

A Donor-Advised Fund is a type of charitable account that allows donors to make irrevocable, tax-deductible contributions to a fund.

These contributions can then be distributed to public charities over time, giving donors the flexibility to support their favorite causes when it's most impactful.

Donors establish accounts with organizations like Vanguard Charitable, which offers a simple way to maximize philanthropy and its impact.

By making a single donation, donors can recommend grants to multiple charities, spreading their generosity over time.

Vanguard Charitable has granted over $19 billion to nonprofit organizations since its inception in 1997, with a significant increase in grants issued and total dollars granted each year.

Their commitment to giving has led to a record-breaking year in 2023, with over $2.6 billion granted to nonprofits in need, a 39% increase over 2022. This marks their seventh straight year of record giving.

The organization has also made it easier for donors to give, with the introduction of the Nonprofit Aid Visualizer (NAVi) and Vanguard Charitable Smartfunds for Hunger & Homelessness, allowing donors to find charities solving problems they care about most at a low cost.

Vanguard Charitable has made a significant impact since its inception in 1997, granting over $19 billion to nonprofit organizations around the world.

This impressive figure is comprised of more than 1.7 million individual grants, with their number of grants issued and total dollars granted increasing each of the past five years.

In 2018, Vanguard Charitable granted over $1 billion for the first time in their history, and this total has continued to rise annually, exceeding $2.6 billion in 2023.

Their commitment to operational excellence has allowed them to maintain a low-cost model, ensuring that the most money possible goes to the charitable organizations that need it.

Vanguard Charitable has granted more than 209,000 grants to over 56,000 unique charities in the past year alone, marking their seventh straight year of record giving.

Their innovative tools, such as the Nonprofit Aid Visualizer (NAVi), have made it easier for donors to find charities solving the problems they care about most.

Looking forward, Vanguard Charitable plans to continue driving down the cost of giving and tailoring their technology platform to donors' ongoing needs.

The total grant amount for the community development project was $250,000.

This amount was allocated to support various initiatives, including the construction of a new community center and the renovation of local parks.

A significant portion of the grant, $100,000, was dedicated to supporting small businesses and entrepreneurship programs.

These programs helped create jobs and stimulate economic growth in the area.

The remaining funds were used to support education and job training initiatives, totaling $50,000.

To use a Donor Advised Fund, you make irrevocable, tax-deductible contributions to an account established with Vanguard Charitable.

Donors can recommend grants to public charities over time, allowing for flexible and long-term philanthropy.

You can grow your charitable assets through Vanguard and other investments, with Vanguard offering some of the lowest fees in the industry.

By prioritizing long-term, strategic philanthropy, you can amplify your charitable impact over time and meet the most challenging needs in society.

Donor Advised Funds like Vanguard Charitable allow for operational excellence, ensuring that donors can make the most of their charitable giving.

Donor advised funds, like those offered by Vanguard, allow you to make a charitable contribution and then recommend grants to various organizations over time.

The benefits of donor advised funds include tax savings, flexibility in grant-making, and the ability to support multiple causes.

You can contribute cash, stocks, or other assets to a donor advised fund, which can be a convenient way to give to charity.

Vanguard offers a low minimum contribution requirement of $5,000, making it more accessible to donors of all levels.

Donor advised funds can be a great way to support your favorite charities while also achieving your financial goals.

Donor advised funds can be a popular choice for charitable giving, but there are some common concerns and misconceptions that people have.

One misconception is that donor advised funds are only for the wealthy, but the Vanguard study found that 75% of donors to donor advised funds have household incomes of $100,000 or less.

Some people worry that donor advised funds are not transparent, but Vanguard's research shows that 95% of donor advised funds have a public list of their grantees.

Another concern is that donor advised funds are not charitable, but they are actually a tax-deductible way to give to charity, allowing donors to deduct the full amount of their contributions in the year they are made.

Donor Advised Funds have their drawbacks, and it's essential to consider these before making a decision. The minimum initial contribution at Vanguard is $25K, which might be a barrier for those who don't have a large sum to donate.

Fidelity's DAF has a lower initial donation requirement of $5,000, making it a more accessible option for those who want to get started with a smaller amount. You also can't use a DAF to donate items you no longer need, so you'll need to keep track of those receipts separately.

If you plan to name a co-advisor, keep in mind that you can't name your kids as successor advisors until they turn 18. This might be a consideration for families with young children who want to involve them in the decision-making process.

Donor Advised Funds come with an AUM fee, which can range from 0.6% to 0.35% depending on the balance. For example, Vanguard's AUM fee is 0.6% per year, or $600 for $100K.

Here are the AUM fees for Vanguard and Fidelity's DAF:

If you're planning to keep a low balance in your DAF, be aware that Vanguard charges a minimum balance fee of $250, assessed every February. This might be a consideration for those who plan to donate their funds quickly, as it can add up to a significant cost.

Using a Donor Advised Fund (DAF) can be considered a "jerk move" by some, as it allows donors to get a tax deduction right away, even if the charity won't receive the money for decades.

The donor gets a tax deduction as soon as they put the money in the DAF, which can be seen as unfair to those who prefer to give money directly to charities.

Up until this year, the author never saw a reason to use a DAF, preferring to give money directly to charities instead.

The author isn't a fan of paying AUM fees to DAF providers, with some charging as high as 0.60%, up to 20X the expense ratios on their mutual funds.