Using Bitcoin for Charitable Giving Trusts

A Strategic Approach

Leveraging long-term, highly appreciated Bitcoin to establish a charitable giving trust can be a transformative way to support causes you care about while achieving significant tax benefits. By donating Bitcoin directly to a charitable entity, you can potentially eliminate capital gains taxes and receive a fair market value deduction, thereby maximizing the impact of your contribution. This strategy can align your philanthropic goals with smart financial planning.

Several organizations specialize in facilitating such donations through donor-advised funds (DAFs) and other charitable vehicles. Below, we explore some of these providers and the considerations involved in choosing the right one for your needs.

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Notable Providers for Bitcoin Charitable Giving

1. Fidelity Charitable
Fidelity Charitable accepts Bitcoin donations for its donor-advised funds. By donating Bitcoin directly, you can avoid capital gains taxes and secure a charitable deduction based on the asset's fair market value. Fidelity Charitable liquidates the cryptocurrency upon receipt and credits your Giving Account, enabling you to recommend grants to charities over time.

2. National Philanthropic Trust (NPT)
NPT offers donor-advised funds that accept Bitcoin and other assets. Contributions are liquidated into fiat, providing flexibility to recommend grants to qualified charities at your convenience. This approach ensures simplicity and accessibility for a wide range of charities.

3. Unchained and University Impact
Unchained, in partnership with University Impact, provides a Bitcoin-native DAF option. Donations are secured using multisignature custody and remain in Bitcoin, allowing for potential long-term appreciation. You can recommend grants to charities, which can receive distributions in Bitcoin or fiat.

4. Schwab Charitable
Schwab Charitable facilitates Bitcoin donations through its donor-advised funds. Similar to Fidelity, Schwab converts Bitcoin into fiat upon receipt, making the proceeds available for grant recommendations.

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Immediate Liquidation vs. Bitcoin-Native Holding: A Key Decision

When choosing a provider, one critical factor is whether donated Bitcoin is immediately liquidated for fiat currency or retained in Bitcoin for future distribution. This decision can significantly impact the effectiveness of your giving strategy, especially from a Bitcoiner's perspective.

Immediate Liquidation for Fiat

Advantages:

• Simplicity: Liquidation ensures recipient charities do not need to handle Bitcoin or worry about volatility.

• Predictable Value: Locks in the Bitcoin's value at the time of donation, securing a fixed amount for grants.

• Wide Accessibility: Fiat proceeds can be distributed to any charity, even those without cryptocurrency infrastructure.

Disadvantages:

• Missed Appreciation: Selling Bitcoin forfeits the potential for future price gains that could multiply the value of your donation.

• Erosion of Value: Holding fiat in a trust exposes funds to inflation over time, reducing purchasing power for long-term distributions.

Bitcoin-Native Holding and Distribution

Advantages:

• Potential for Appreciation: Retaining Bitcoin allows the trust to benefit from its historical tendency for significant long-term growth, amplifying the impact of your donation.

• Alignment with Bitcoin Ethos: Preserves the integrity of Bitcoin as a hard asset, consistent with the values of many Bitcoiners.

• Enhanced Giving Power: Appreciation over time could enable larger or more frequent distributions to charities.

• Flexibility: Some providers offer the option for distributions in Bitcoin or fiat, empowering recipient charities to make strategic decisions.

Disadvantages:

• Volatility Risk: Bitcoin's price fluctuations may introduce uncertainty in the trust's value.

• Limited Participation: Not all charities can accept Bitcoin, which may narrow your pool of eligible recipients.

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Balancing Philosophical and Practical Considerations

For Bitcoiners, the Bitcoin-native approach is often more appealing due to its alignment with long-term appreciation and the philosophy of sound money. By retaining the Bitcoin within the trust, donors can potentially multiply their giving impact, particularly if distributions are planned over decades. However, practical considerations like the recipient charities’ ability to manage Bitcoin and the need for predictable funding should not be overlooked.

Providers like Unchained and University Impact stand out for their ability to preserve donations in Bitcoin, allowing donors to align their giving with Bitcoin’s value proposition. Meanwhile, traditional providers like Fidelity Charitable and Schwab Charitable offer straightforward fiat-based solutions, making it easier for charities to access funds.

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Conclusion

Donating long-term appreciated Bitcoin to a charitable giving trust offers a powerful way to maximize your philanthropic impact while benefiting from significant tax advantages. Whether you choose a provider that liquidates Bitcoin for fiat or one that retains it in Bitcoin depends on your goals, the nature of your chosen charities, and your perspective on Bitcoin’s long-term potential.

For Bitcoiners who view Bitcoin as the hardest form of money, a Bitcoin-native approach aligns with their values and could amplify their giving impact through appreciation. On the other hand, fiat-based solutions offer simplicity and accessibility, ensuring a wide range of charities can benefit from your generosity. By carefully evaluating your priorities and the capabilities of different providers, you can create a giving strategy that reflects both your financial goals and your commitment to making a difference in the world.

Not financial or legal advice, for entertainment only, do your own homework.  I hope you find this post useful as you chart your personal financial course and Build a Bitcoin Fortress in 2024.    

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