Charitable Giving Service Disclosure

Betterment does not provide tax advice. Donors should consider consulting their tax and/or legal advisors before initiating donations.

Betterment provides clients the opportunity to donate appreciated shares with long-term capital gains from the donor’s Betterment Account (other than shares in the donor’s account that are held in mutual funds) to a select number of charitable organizations (and also facilitates donations to a donor-advised fund called Daffy, as described below).

Donors should be aware that there may be small discrepancies between the requested dollar value of a donation and the value of the deduction reported on the tax receipt Betterment provides. The value of the deduction is the fair market value of the shares on the date the donation is completed, which is calculated by averaging the highest and lowest values at which the shares trade over the course of that day. That value may differ from the value of the shares at the time a donor initiates the donation.

Once a donor completes a donation by clicking “Donate now,” there will be no opportunity for the donor to undo the transaction or receive a refund in the amount of the value of the donated shares. Donors should carefully consider and review donations before completing them to ensure that the donations are consistent with their wishes.

The IRS requires taxpayers to complete and file a Form 8283 with their federal income tax returns for gifts of property (including publicly traded and other securities) valued at $500 or more. Donors are ultimately responsible for ensuring that the information they file with their tax returns, including the information on Form 8283, is complete and accurate. For additional information, see IRS Form 8283, Noncash Charitable Donations.

By completing a donation, donors agree to allow Betterment to provide their names and email addresses to the recipient charities. Partner charities have committed to not disclosing to the public a donation indicated as anonymous. However, a donor’s identity will still be provided to the recipient charity.

Betterment does not charge any of its partner charities management fees for donations they receive so long as the total assets managed by Betterment for each charity do not exceed $1 million. Charity administrators are able to withdraw funds to avoid accruing fees on balances over $1 million.

Betterment does not conduct independent due diligence on its partner charities and is not responsible for how the charities will use donations. Before completing a donation, donors should ensure that they fully understand and are satisfied with how a charity uses donated funds.

Betterment’s algorithm chooses from a donor’s account the tax lots held for more than one year with the most gain in value regardless of whether donating those shares would cause the portfolio’s allocation to drift. In the absence of a deposit to replace the donated shares, making a donation could accelerate the sale of assets to rebalance a donor’s portfolio, which could cause the donor to incur taxes that would not otherwise have been owed in the absence of a donation.

Charitable Giving With Daffy 

Daffy administers a tax-advantaged charitable giving vehicle known as a donor-advised fund. Even though you can direct your donation to the charity you indicate (subject to Daffy’s sole discretion), for tax purposes your donation of shares to Daffy is an unconditional and irrevocable charitable donation to Daffy Charitable Fund, a recognized tax-exempt public charity under sections 501(c)(3), 509(a)(1), and 170(b)(1)(A)(vi) of the Internal Revenue Code. Your tax receipt will state “Daffy Charitable Fund” as the recipient charity. The distribution from Daffy to your indicated charity will not count as a separate donation, so you should disregard any donation receipts you may receive from your granted charity. For additional information regarding the tax treatment of your donation through Daffy, please consult your tax advisor. 

Betterment receives compensation from Daffy in the form of a referral fee when Betterment refers customers to use Daffy, which is a conflict of interest. The fee Betterment receives is greater for the more expensive Daffy membership tier, but Betterment does not make any recommendation as to which tier you should choose, or whether you should make contributions to Daffy at all. Please refer to Daffy’s member pricing structure for more information. 

Although you have the ability to recommend how the funds are invested and distributed, Daffy retains the ultimate authority and control over the assets in the fund. Your donation will be subject to a separate agreement between you and Daffy, and Betterment is not a party to that agreement. Daffy may determine, in its sole discretion, not to grant funds to certain charities, and Betterment is not responsible if Daffy Charitable Fund is unable or unwilling to make grants to certain charities. Although Daffy will receive the entire value of your donation through Betterment’s platform, Daffy will assess fees as part of the transfer to the charity of your choice. Please refer to Daffy’s pricing structure for more information.