A number of investment management companies offer tools to help make gifting easier
and at the same time maximize the funds available through asset management and tax
savings. For example, Fidelity Investments, The Vanguard Group, Inc. and Charles
Schwab and Co., Inc. all administer what are called donor-advised funds. Since they
are all similar in how they function, to explain how they work and what the benefits may
be to you, we will focus on Fidelity’s Charitable Gift Fund. It is an independent 501(C)
(3) public charity that administers donors’ charitable gifts.
Investors with Fidelity accounts can open a Fidelity Charitable Gift Fund account and
easily transfer cash and securities to the account, online. Once transferred, the gifts
are irrevocable and qualify for a tax deduction in the year of transfer (with some
limitations). If a stock is transferred, it is immediately sold by the Gift Fund managers.
Any gains on securities transferred avoid taxation. Therefore, assets with large capital
gains tax liabilities allow individuals to give more by avoiding the potential capital gains
taxes.
Donors decide how the assets they have gifted are to be invested. A number of
investment “pools” are available in which to place the donated funds. Some are more
aggressive than others; some focus on capital growth; some focus on income. The
donor can decide how aggressive he or she wants to be. With professional
management, donors have the possibility of seeing their accounts grow, providing the
possibility of increasing the amount they can give to charities.
A Fidelity account must first be funded with a minimum amount of $10,000. After opening
the account, gifts can be made to the donee online with a minimum amount of $100.
Gifts must be made to IRS qualified public U.S. charities.
The Gift Fund provides a way to reduce taxes in a year of unusually high expected
income. By bunching several years of gifts together, one can meet the Gift Fund
minimum and receive a tax deduction for the total amount gifted in one year. The funds
gifted can then grow tax free in the Gift Fund account and then be distributed to
charities over the following years.
In summary, the Fidelity Charitable Gift Fund and others like it provide a good tool to
maximize the amount of gifts you can give to your favorite charities.
David C. Patterson, CFP® and Erin Patterson, CFP® are the owners of Patterson Advisors, LLC, a fee-
for-service-only financial advisory firm. Patterson Advisors, LLC is a Registered Investment Advisor,
registered with the State of Michigan, with offices in Waterford and Royal Oak, Michigan. Visit www.
pattersonadvisorsllc.com for more information.
Published in The Oakland Press Our Town Online Clarkston, May 2007
Published in the Oakland Insider, September 2007, Re-titled as: Managing Your Gifting
Program
A Tool to Manage Your Gifting Program
By David and Erin Patterson