In USA can I donate index funds to a charity? If not what's the lowest effort option to take advantage of security donation over money donations?

Question

I currently donate way too much money to charity, paying no income tax as a result. The remainder of my money is currently invested in index funds as their expected to average about the same amount as I could manage with more targeted investments without my having to put in much effort, yay laziness!

However, I get more of a tax savings from donating securities then cash. I'm wondering rather this includes the index funds I already own? I imagine even if I am allowed to donate them I'm unlikely to gain much since their expected increase in value over when I bought them isn't very high?

If I can't, or index funds are just not an efficient option for donating, how can I best take advantage of donating securities over cash assuming I'm super lazy and don't want to figure out how to trade stocks efficiently? Is there a low effort approach to maximize the tax savings I can get from donating securities that is not expected to lower my average investment income significantly? The latter is important, since I'm not paying income tax anyways and plan to donate all my money to charity eventually the advantage of putting off the donation to some future date is only so large, taking an appreciable loss in expected investment income to allow me to better delay my donations is not likely to be optimal.

That being said I currently run into the problem that at the end of the year I need to take money out of my index fund rather it's currently up or down, and I haven't been good at watching the fund to know when is the optimal time to withdraw a large portion of the money*. So maybe there is a smarter investment option just to avoid the risk of taking losses when I withdraw money at the end of the year?

*For that matter I'm not very good about knowing when is the best time to put money into the fund either, though so far I've moved money into the index funds whenever my father could get a promise of some sort of matching contribution from the company I'm invested with for transferring a large sum of money to them which seems to work out pretty well

Answer 1

To answer the question in the title (ignoring the rant): yes, you can donate securities, including mutual fund shares, to a charity, and donating appreciated shares avoids capital gains taxes when those shares are sold. Ask the charity in question how to do so. In some cases it's just a matter of transferring shares to the charity's account at the same brokerage; in others you'll have to get the two brokerages instructed to do a "transfer in kind". The charity and/or your broker can supply the required forms and tell you how to meet the anti-fraud requirements (which may involve going into the office of a bank you do business with and having them do a Medallion Certification on your signature -- a kind of improved notarizing).

I should note: smaller charities may not have experience with this and may not want to deal with it for small donations. The workaround for that is to set up a Donor Advised Fund account, transfer shares "in kind" to it, and let it deal with getting the money to the charities in a form their accounting is happy with. There is a fee that has to be paid to the folks running the DAF, but that may itself be deductable, and in exchange everything you fund from the DAF only takes one line on your tax forms -- that plus being able to fund small charities indirectly from shares justified the fee for me.