Donor-Advised Funds (“DAFs”) have become one of the most popular charitable giving vehicles in the United States over recent years due to the simple, powerful, and highly personal approach to giving they make possible.
DAFs are basically accounts set up at a financial institution or charity that allows donors to make a grant and receive an immediate tax benefit in the form of an income tax deduction. Once the fund is set up with you as the advisor, the contribution is placed into an account where it can be invested and grow tax free. At any time thereafter you can select the legally recognized charities to make grants and contributions to
Several other benefits of a DAF include:
- Little or no initial costs, start up fees and costs are often covered by the sponsoring organization and the fund can be established immediately.
- The tax deduction limit is fifty percent (50%) of adjusted gross income, as opposed to only thirty percent (30%) for private foundations.
- All annual tax reporting is handled by the Donor Advised Fund, there is nothing for the individual to report.
- The valuation of the gift is generally fair market value.
- You as the donor may recommend grants and investments, however the DAF sponsor or fund administrator has legal control and makes all the final decisions.
- There is no minimum required payout per year, as opposed to the minimum five percent (5%) required payout per year for private foundations.
- Donors may name advisors to recommend grants and investments and successors to those advisors.
If you are interested in creating a Donor Advised Fund or have other questions about maximizing your charitable giving, please feel free to contact our office.