A donor-advised fund, or DAF for short, is a philanthropic account held by a parent non-profit organization. DAFs started as far back as the 1930’s and are now the largest growing charitable giving vehicle in the United States. There are roughly 269,000 donor-advised finds to date that hold $78 billion in assets!
With such a large amount of assets in donor-advised funds, those who start those funds are able to advise where those funds can go to benefit charitable causes.
Why start one though? Below are just a few reasons.
1. DAFs are easy to establish and use
It takes just a few minutes to create a DAF, and donors can recommend grants from their fund at any time. While some organizations require thousands of dollars to start one, you can start one for free at Legacy Global Foundation here. Like private foundations, DAF holders may assign successive advisors, such as heirs, so that others may carry on their legacy of giving.
2. Donation Flexibility
Along with cash donations, donors may give a wide variety of assets such as appreciated stock, business interest, and real estate.
3. Tax Advantages
Contributions to a DAFs are 100% tax-deductible, and gifts of appreciated property like public stock, closely-held stock, and real estate are deductible at full fair-market value. This is a significant advantage over giving closely-held stock or real estate to a private foundation, where the deduction is limited to the cost basis of the asset (Cost basis is what you bought the asset for to begin with and does not include any appreciation of the stock or real estate).
4. No Setup Costs
There are no costs to establish a DAF, no need for separate tax filings, no administrative fees, and no minimum funding requirements. It is like opening a checking account with a bank without any fees attached to it. While the money in the DAF is a completed gift, the donor can still advise on where those funds go. Legacy Global has an excellent vetting process to ensure that grants made go to eligible, compliant, charitable organizations and causes.
5. Gift Today, Grant Tomorrow
DAFs allow donors to make gifts today and then recommend grants over their own timelines. This means you can make the gift today and get a needed tax deduction now but decide later on what causes to support.
Donors who choose to give through DAFs may also choose to remain anonymous. Private foundations have public tax filings, which makes it easier to know who is making the donation.
This video also explains more about donor-advised funds.