Charitable donor advised fund summary

Summary comparison of funds: Fidelity fund expenses:

Donor-advised funds also come with an additional layer of annual administrative costs. Fidelity, Vanguard, and Schwab all charge a 0.6% administrative fee for accounts with balances up to $500,000. All three have tiered expense structures, so accounts with balances greater than $500,000 are subject to lower fees in percentage terms.

These charges are in addition to the fees on the underlying investments (operating expenses for mutual funds and exchange-traded funds, or trading commissions for individual stocks and bonds). All these fees come out of the amount donated, making donor-advised funds less cost-efficient than donating directly to a charity.

All three donor-advised funds offer a range of investment options, including both diversified asset pools with exposure to a range of asset classes, and single-asset pools that can be used as building blocks for donors to put together their own portfolios. Fidelity and Schwab offer both in-house funds and third-party offerings. Vanguard’s lineup consists almost exclusively of in-house funds, but nearly all the investment options are index funds with ultra-low expense ratios.

Some wealthier families and individuals might prefer to set up a private foundation to make charitable donations. A private foundation is a separate legal entity that has its own articles of incorporation, bylaws, and board of directors or board of trustees. Unlike donor-advised funds, foundations are required to file annual tax returns and distribute at least 5% of the previous year’s average assets each year, but also have additional flexibility for making grants. For example, a private foundation can provide scholarships and fellowships directly to individuals, make direct grants to families or individuals facing hardships and emergencies, and run its own charitable programs.