This question is kind of off topic, but this is the best sight I can find for it, so hopefully your humor me. I'm trying to figure out the optimal way to donate my charitable money, this question applies only to the money I have all ready allocated to 'charity', I donate excess income to 'charity' and make donations anywhere between every month to every year depending on personal investments and other circumstances.

I donate a sizable amount of money to charity. I currently favor the GiveWell.com non-profit, which ranks other non-profits on efficiency via through analysis. I trust GiveWell to find the most optimal charities for me to contribute to.

However, I also have my own personal charitable fund. It works very similar to a 401K, after I donate to my fund I can allocate those donations to mutual funds and all profits are untaxed and re-invested into my fund. I can then, at any time, grant the money to a non-profit as I see fit.

So, which is the more optimal donation option? If I put money into my charitable fund obviously it makes profits, and baring a complete collapse of our stock market, I will inevitably have more money to contribute to charity in the future by donating to my fund now. However, by that logic I should never donate money to charity, because I'm always gaining profits in my fund. Ultimately at some point the money has to come out of my fund and be granted to a charity or it's not actually doing any good.

Presuming I have a will in place so that if I get run over by a truck tomorrow which dictates how to grant money from my fund is there an advantage to donating money directly to givewell now, vs donating it all to my charitable fund to gain interest? Am I missing a sort of charitable opportunity cost to not granting the money sooner?

Other factors I can consider are that while I'm alive I can ensure that I donate money to optimal charities. I feel pretty strongly about GiveWell now, enough to highly recommend it over nearly any other charity, but who's to say that in 50 years GiveWell will still be optimal location to donate. If I put off granting money until my death I risk the money being granted to less efficient charities, which is a big deal since the difference between efficient and inefficient charities is gigantic and, frankly, I don't trust many to take the long view and properly analyze charities to find an optimal option rather then donating to a 'feel-good' sub-optimal charity. In short if the arbiters of my will is left to handle granting the money without explicitly and updated directions from me I suspect there would be a significant drop in utility from those donations compared to what I could have managed.

Currently my fund is assigned to be granted to GiveWell if I die, I don't need a will for that, schwab has options to request it. You could argue that I simply should make sure I'm updating my funds 'will' for if I die every few years to keep it optimal...though honestly trusting me to remember to for my entire life gives me too much credit for organization :)

Also, are there any fluctuations in the stock market and/or society that make certain times more optimal to donate to charity and others more optimal to go to my fund? For instance presumably if I grant out of my fund when I feel the market is unusually inflated to avoid a bust that would be good, and placing money in my fund when I feel the market has just taken a crash and is ready to go up would get me more return on investment? However, I don't watch the market closely enough to have an intimate understanding of when I expect it to rise or fall. Are there any decent rules of thumb one could use for deciding rather to favor donating to a fund vs granting from the fund, if it's indeed optimal to alternate such strategies?

I think I may also have some ability to borrow against my fund, which may in theory allow me to risk a slightly lower emergency fund and thus gain higher returns on money that doesn't have to be kept fungible. Though as I recall the penalty for borrowing against the fund was such that I would not want to ever have to borrow against it, so it would be a minor factor. In fact as of now it's a non-factor unless I relearn the rules on borrowing against it.

  • Charitable funds have rules to the effect that a certain percentage of the assets must be donated each year: you cannot donate (and write off on your itemized deductions) $50K each year, say, to your charitable fund and just let the money grow until a good opportunity comes along because the market is booming. What does Schwab tell you about this? Apr 10, 2015 at 15:00
  • @DilipSarwate that is true, but it's only a percentage so the question still stands. If I donate only 10% of my fund a year then my fund will continue to grow, at least until my contributions + profits for the year = 10% of the fund's size. The question of rather to stay at that equilibrium or grant sooner or never donate to the fund still stands.
    – dsollen
    Apr 10, 2015 at 15:19
  • So, please, pretty please, tell us what is the minimum percentage of assets that must be donated? and when are the assets valued? Does it say that 10% of the assets as of 12/31/2014 must be donated during 2015? Or at least 10% of the maximum value of the assets at any time during 2015 must be donated during 2015? Apr 10, 2015 at 15:28

1 Answer 1


It really depends on what your goals are.

If your intent is to benefit the charity, I'm sure that they would tell you that the sooner you give them the money, the better. If they think that the money would do them more good invested then spent, they will invest it.

The money you have sitting in your "charitable account" doesn't benefit anyone until you give it away. It really doesn't benefit you, either. You take your tax deduction when you contribute, and it is really out of your hands at this point.

The only reason I could see for using a charitable account this way is if you don't know who you want to give money to. If this is the case, you can contribute money to your charitable account now and take the tax deduction now, and wait to identify a worthy charity later.

But if I were you, I wouldn't wait too long to find someone to give the money to. There are lots of good organizations that would do a lot of good with that money, and the sooner they get it, the better. If you skip the charitable account and donate directly to them on a regular basis, you can experience the joy of partnering with a charity to help people. If you decide in the future to switch to a different charity, then you do so. Waiting until the "right time" to donate doesn't really do anyone any good.

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