Bear Mountain Capital Inc.

Charitable Giving Through a Donor-Advised Fund

| October 26, 2023


Earlier this month, our team had a meeting with Fidelity Charitable. Although they share the Fidelity name with Fidelity Investments (the custodial firm), they operate as an independent 501(c)(3) public charity.

Fidelity Charitable works with donors to maximize their philanthropic wishes through a donor-advised fund, commonly referred to as a DAF. What makes a DAF so great that I needed to write about it?

DAF’s are unique in that they reside at the intersection of charitable giving, saving money in taxes, and investing. Let me tell you more.

A DAF is a charitable investment account, meaning your dollars can be invested while you decide which organizations you’d like to give to.

When funding a DAF, you receive a tax deduction much like you would by donating to any other eligible non-profit AND you also have the potential to grow your donation by investing those dollars.

It’s a way to be smart with your money while giving back to causes that are important to you!

If you know a thing or two about compounding, you understand that your original donations could grow significantly over time, making your donation that much more impactful while also saving money on taxes!

If you are already charitably inclined, here are a few examples where opening a DAF could be effective:

  • You want to give to charity but need time to do research on organizations you want to support.
  • Rather than selling appreciated assets, paying capital gains taxes, and then donating to a charity, you could fund your DAF with the appreciated asset itself. In doing so, you would avoid paying capital gains taxes while still receiving the tax deduction on your donation.
  • You have an upcoming liquidity event that may generate large capital gains and would like to offset some of the tax burden by making charitable contributions.
  • You are planning to do a Roth conversion this year and want to offset some of the tax burden.

Very exciting stuff!