Understanding Charitable Gift FundsSubmitted by Headwater Investment Consulting on August 6th, 2014
By Kevin Chambers
One of the unique opportunities that Fidelity Investments offers is their Charitable Gift Fund (CGF). The Fidelity CGF was launched in 1991 with a goal of increasing charitable giving across the United States by giving Fidelity clients an easy way to manage their charitable donations. The CGF is the second largest public charity and the number one grant maker in the United States. Since the fund was established, donors have given grants of more than $17 billion.
How it works:
First, a donor creates a Donor Advised Fund (DAF) at Fidelity CGF in the donor’s name with a contribution of cash or securities, like mutual funds, ETFs, stocks, or bonds to their DAF. The minimum contribution is $5,000. This donation is irrevocable, meaning you can’t take it back. The full donation is immediately tax deductible. The donor can select from an option of investment allocation pools ranging from aggressive growth to conservative income funds. Investment growth in the DAF is tax free, allowing all future investment gains to be passed on to charity. The donor can then direct donations out of their account to any 501(c)(3) charity in amounts of $50 or more. It essentially creates a miniature foundation that the donor can direct.
Simplified tax reporting: The CGF simplifies the tax reporting process. The initial donation to the CGF is the only charitable donation that will show up on the donor’s tax return. No more keeping track of all of those separate donation receipts. Just one lump sum donation. There can be tax advantages to consolidating all of a donors’ charitable giving into one tax year, instead of spreading it out over several.
Solution for assets with big capital gains: The CGF also allows donors to donate securities easily. This can bring a tax advantage as donated securities are exempt from capital gains tax. Assets can be transferred directly from a brokerage account held at Fidelity.
Easy to donate: Grants can be recommended over the phone or online and the donations are sent out by Fidelity directly to the charity. The grant history of the donor is always available online for easy tracking. There is also an option for your grant to be sent anonymously.
Reoccurring grants: Another useful feature allows donors to set up periodic gifts. The system will send out a monthly or quarterly donation to the charity of the donor’s choice. This can be a good tool for planning and organizing giving, especially if the donor is someone who makes regular donations to a charity.
Setting up a CGF can be a unique and easy way to donate to worthy causes. If you have any questions on setting up your own Fidelity Charitable Gift Fund, please let us know.