Granting from a Vanguard Charitable account

One of the beauties of a donor-advised fund is its flexibility, which enables donors to choose when to grant from their account and the number of grants they want to make. One contribution can yield many grants. Donors approach granting in a variety of ways, although many choose to make smaller grants while simultaneously saving to make larger grants in the future.

Vanguard Charitable enables donors to:

  • Make unlimited grants from the assets in their account.
  • Choose whether to give an unrestricted grant, which enables charities to use the funds where their need is greatest, or to designate a specific purpose.
  • Recommend one-time or recurring grants to be issued annually, semiannually, quarterly, or monthly on a date of their choosing.
  • Decide to be recognized for their grants or remain anonymous to protect their privacy.
  • Request customized grant agreements with specific reporting requirements.
  • Recommend international grants.
  • Choose the investment option from which to pull the funds.

 

Donors can easily recommend grants online or with the appropriate form



Minimum grant amount

Our minimum grant amount is $500.

We believe this threshold encourages high-impact philanthropy by enabling donors to be more strategic with their giving and minimizing charities’ processing of donations. This minimum also allows us to keep processing expenses as low as possible, creating savings that we pass along to donors and that in turn enable them to ultimately grant more to charity.

 


Due diligence

Traditionally, donors are responsible for ensuring that their grants are 100% tax-deductible. Vanguard Charitable reduces that administrative burden by managing the review and distribution process.

When reviewing your clients’ grant recommendations, we confirm that the nonprofits are qualified public charities, the funds will be used for purposes that meet IRS requirements, and the grants will not result in “impermissible benefits” that would reduce your client’s charitable deduction.



Charity research resources for donors

To help our donors research charities before they grant, we provide free access to the comprehensive and advanced GuideStar National Nonprofit Directory. We also make available other valuable research resources and educational content to help donors make informed decisions.

 


Grant documentation

When a grant is approved, we send the payment and a letter acknowledging the gift to the charity. For each grant, Vanguard Charitable provides a grant confirmation letter to account advisors that includes details on the grant, as well as the final investment allocation from which the funds were withdrawn.

Account advisors and interestead parties can also easily see:

  • The status of their grants, whether pending or approved.
  • Their interest areas for granting.
  • A consolidated list of grants.

 



Granting requirements

Unlike a private foundation, DAF donors are not required to grant a certain percentage of their account every year. In practice, however, Vanguard Charitable donors are active granters, with 85% to 90% granting every three years and the majority of donors granting at least 5% of their balance per year.

If an account has not granted within a four-year period, Vanguard Charitable will attempt to contact account advisors to initiate at least one $500 grant. If repeated contact attempts are unsuccessful after one year, Vanguard Charitable will pursue granting opportunities in the following ways.

Inactive accounts with balances greater than $15,000:

  • Vanguard Charitable will attempt to contact the account advisors to encourage a grant. If account advisors do not respond to outreach attempts by recommending a grant, Vanguard Charitable will issue a grant for 5% of the account balance to either the charities in the succession plan or if the succession plan does not immediately direct funds to a public charity, to The Philanthropic Impact Fund, a fund overseen by Vanguard Charitable's board of trustees that supports nonprofits that increase the amount and impact of charitable giving.
  • If the account continues to be inactive for three consecutive years, Vanguard Charitable will enact the account advisor’s succession plan. If the succession plan does not direct grants to a qualified public charity or charities, the funds will be distributed to The Philanthropic Impact Fund.

Inactive accounts with balances of $15,000 or less:

  • Vanguard Charitable will enact the account succession plan. If the succession plan does not direct grants to a qualified public charity or charities, the funds will be distributed to The Philanthropic Impact Fund.

     


Grant purposes

While we encourage donors to make unrestricted gifts to provide charities with flexibility in using the money to best serve their constituents, donors can decide how to earmark their grants in a number of ways. Common grant purposes include general operating expenses, annual funds, capital campaigns, class gifts, scholarship programs, underwriting an event, or a specific project.

Per IRS rules, grants cannot be made for lobbying purposes, to support political campaigns, to support specific individuals, or for any purpose that is not charitable.

To avoid stiff IRS penalties, grants from philanthropic accounts must be made exclusively for charitable purposes and cannot result in more than incidental benefit for a donor, account advisor, interested party, or family member. Examples of prohibited benefits are tuition payment; receipt of anything of value in return for the grants, such as free dinner or goods or services; and some membership benefits.
 



Granting best practices

Our donors know that all charitable gifts are meaningful, but they tend to be driven by a specific desire to practice strategic philanthropy. This means taking an approach that the average charitable giver may not consider.

  • Giving year-round. The majority of charitable giving happens toward the end of the year due to tax deadlines and the timing of fundraising appeals. But 96% of charities prefer year-round giving, which provides the stability needed to manage programs on a consistent basis.
  • Unrestricted granting. Donors may hesitate to have their money applied to a nonprofit’s overhead because it carries a stigma of excessive CEO salaries or fundraising costs. However, reasonable overhead is necessary for a charity to achieve its mission. Unrestricted granting, also called granting for areas of “greatest need,” can exponentially help these organizations.
  • Leveraging relationships. Many donors believe philanthropy can be most effective when they involve family and friends, especially those in younger generations. Another example of leveraging relationships is taking advantage of employers’ matching gift policies.