I grew up in a largely Catholic family. I may not be very religious now, but one of the principles that I was taught growing up that has stuck has been charitable giving.
I wholeheartedly believe in donating my time and money to charities and organizations that I believe in.
With the holidays upon us, this is usually the time I rev up my donations to help charities reach more of those in need. At this time of year, I usually end up reflecting on the past 11 to 12 months and truly recognize how thankful I should be (and am) for the life I have and my overall good fortune.
And, for investors during 2017 the fortune has been good!
I want to spread that good fortune to others, and I am glad that companies like Betterment share in these values!
Betterment is now making it even easier to donate money to charities.
Starting November 28, 2017, all Betterment customers will be able to donate shares from taxable accounts to charitable organizations of their choosing.
Read More: My Betterment Review.
- Donating securities instead of cash helps maximize your charitable impact by saving you money on taxes.
- When you give appreciated securities to a charitable organization, neither you nor the charity pays capital gains tax (BONUS).
- Betterment will calculate and recommend donating shares that you’ve held longer than one year so that the gift can be deducted up to the maximum amount come tax time.
- After donating, you can replenish your account, to help keep your saving and investment goals on track.
Gifting securities helps maximize your charitable impact. As an investor, there are two tax advantages you receive when you make a charitable donation:
- Eliminating capital gains tax on donated shares.
- Deducting the value of the gift on your tax return.
When you donate securities, the value of those assets is transferred to the charity. You, the donor, don’t pay any taxes on the gain, and the recipient organization generally doesn’t pay taxes on the gain either. Win-Win!
And, as long as you itemize your deductions, the whole value of your donated securities is deductible on your income taxes, just like any cash donation would be, as long as you’ve held the securities for more than one year.
So, in effect, donating your investments can help you maximize your total philanthropic impact year-to-year.
For years, mainly only the wealthiest of investors and donors realized and utilized the tax-saving benefits of donating their invested assets, but Better ment wants to change that because most taxpayers who also invest can benefit from using their investments to maximize the impact of their donations every year.
They also want to make it as easy as donating cash!
Here’s how they are making it so much easier:
- On your behalf, Betterment tracks how much of your account is eligible to give to charity. You typically should only donate assets that you’ve held for more than one year, but they will take all the hassle of sorting through your assets and will do it all for you.
- They will estimate the tax benefits of your gift. Before you complete your gift, Betterment will let you know the estimated tax benefits, including the expected deductible amount and potential capital gains taxes saved.
- Betterment will move the assets from your account to a charitable organization’s account without any paperwork. With a traditional broker, a charitable gift has to move from your account to the organization’s brokerage account, which can take time and paperwork. Betterment is offering charities investment accounts at no-charge (on up to $1 million of assets) to make the gift process seamless and paperless.
- After the donation is complete, Betterment provides a tax receipt. The receipt is emailed to you, and it will also be available in your Betterment account at all times.
As this new feature launches, Betterment is partnering with a small selection of charities to start, but reports that they are dedicated to adding new charities in the future. At this point, you’ll be able to choose from the following charities:
- UNICEF USA
- Wounded Warriors Family Support
- Hour Children
- Against Malaria Foundation
- Save The Children
- Feeding America
- Big Brothers Big Sisters of NYC
- World Wildlife Fund
- Breast Cancer Research Foundation
If you don’t currently see a charity you’d like to donate to, you can request a new charity be added to Betterment by navigating to the “Give to charity” option in the “Transfer” tab of your account. Where you’re instructed to select a charity, there is an option to request a new one at the bottom of the page.
You can open up Donor Advised Funds (DAF) at almost all the big brokerage firms (Vanguard, Fidelity, T Rowe Price, etc). They serve the same purpose. However, most of these accounts have to be opened and kept separate from your other investment accounts and there is a minimum balance to open ($5,000 being the lowest I have seen). Through my research, Fidelity also charges a $100 annual fee (that’s a 2% fee if you have the minimum of $5k).