A Donor-Advised Fund (DAF) is a charitable giving vehicle administered by a public charity created to manage charitable donations on behalf of organizations, families, or individuals. It is a centralized vehicle for charitable giving that makes it easy for donors to dedicate funds to support their favorite nonprofit organization. It also provides an operationally convenient and tax-efficient method for donors to manage their charitable giving.
Here are some key features of a DAF:
- A DAF is a giving account established at a public charity.
- Donors can make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the account to qualified charities over time.
- Donors can structure their DAF in a way that best meets their charitable goals, including naming it anything they like, appointing friends and family members to help manage the responsibilities, and designing a Legacy Plan to determine what will be done with the DAF assets beyond their lifetime.
- Donors can recommend an investment strategy for the assets in their DAF account by selecting an allocation from among the pre-approved investment offerings. The assets in the DAF are invested following the donors recommendations, and any investment growth is tax-free, giving the potential to create even more philanthropic capital for grantmaking.
- DAFs have become popular in part because of their versatility, allowing donors to give when, what, how, and where is most favorable for them.
- The average grant coming from the nation’s two largest DAF sponsors was more than $4,000 in 2015.
Overall, a DAF is a flexible and tax-efficient way to build a charitable legacy and support the causes you care about.
