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Donor-Advised Fund (DAF)

Few Charitable giving options provide the versatility and tax efficiency that donor-advised funds do. A donor-advised fund is a charitable giving vehicle administered by a community foundation or other qualified third parties and is created for the purpose of managing charitable donations on behalf of an individual, family, business or organization. Donor-advised funds are one of the most efficient charitable estate planning tools available to anyone looking to create a legacy of charitable giving that can last for many generations. Donor-advised funds provide donors with flexibility and convenience along with the full tax advantages associated charitable giving.

A donor-advised fund offers the opportunity to create an easy-to-establish, low cost, flexible vehicle for charitable giving as an alternative to direct giving or creating a private foundation. Donors enjoy administrative convenience, cost savings and tax advantages by conducting their grant-making through a donor-advised fund.

Community foundations pioneered the development of donor-advised funds, and a number of commercial sponsors, educational institutions, and independent charities now offer this service. Donor-advised funds are the fastest growing charitable giving vehicle in the United States, with more than 125,000 donor-advised accounts established, holding over $27 billion in assets.

Seven Advantages Provided by Donor-Advised Funds

1. Enjoy an immediate tax deduction
   Your contributions are fully tax deductible in the year they're made.
2. Donate appreciated securities tax free
   When you donate appreciated securities to a Donor-advised fund, you may immediately deduct their fair market value from your taxes, without incurring any capital gains liability.
3. Create a legacy of giving
   You may name account advisors who will have the ability to recommend grants from your account. You also have the ability to select successors, who can continue your charitable legacy by recommending grants beyond your lifetime.
4. Separate tax planning and charitable decisions
   Immediate tax advantages through contributions can be achieved now and grants can be recommended to charities later. Donor-advised funds can help eliminate the year end pressure to select a charity and make a grant.
5. Record keeping made easy
   Donor-advised funds provide consolidated reporting and record keeping. You'll receive semi-annual account statements, gift receipts and IRS ready tax information. There is no need to hire your own attorney to draft trust documents and no need to hire a CPA to draft an individual return for your account.
6. Flexible support
   Your donor-advised fund gives you the flexibility to contribute to a nonprofit organization as long as you desire, but if situations change with the nonprofit, the donor has the flexibility to change his/her support for that organization. When donors give a major gift directly to a nonprofit organization, their gift is irrevocable. When donors give through their donor- advised fund, their gifts can change every year, at the recommendation of the donor. This flexibility is very appealing to philanthropically inclined citizens.
7. Confidentiality
   If you prefer, your grant(s) can be made anonymously, so that your name and personal information will not be known.

10 Reasons to Set Up a Donor-Advised Fund Rather Than a Private Foundation
CLICK HERE to find ten practical reasons that outline why establishing a community foundation charitable fund might make more sense than creating a private foundation.