The Donor-Advised Fund (DAF) is the fastest-growing charitable vehicle in the United States today because it offers excellent tax saving options, great flexibility, and complete anonymity.
What Are Donor Advised Funds?
A Donor Advised Funds (DAF) is a personalized account you setup with a sponsoring non-profit organization. Once setup, the DAF acts as a centralized account for all of your charitable giving. This flexible tool provides a variety of benefits, but is especially helpful in converting more tax efficient gifts such as stock, real estate, business interest, or other asset based gifts into funding for ministries that may not be able to accept these types of gifts directly.
How Does a Donor Advised Fund Work?
- You make an initial, irrevocable gift of cash, stock, or a complex asset to fund a DAF at a brokerage firm, community foundation, mutual fund company, or Christian organization.
- You receive an immediate tax deduction for your gift.
- The assets in your DAF can grow tax-free, either by money-market returns or selecting to have the funds invested.
- On your advisement, grants are sent to your favorite ministries whenever you like, with no annual requirement or minimum distribution from the fund.
Benefits of a Donor Advised Fund?
- Establish an easy, flexible way to support the causes you care about.
- Maximize your tax savings through smarter and more strategic ways to give.
- Make a contribution now, receive an immediate tax deduction, and recommend grants to charities whenever you’re ready, even in future years.
- Invest the cash in your DAF and allow it to grow tax-free, creating even more funding for charitable grants.
- Simplify tax reporting by receiving a single charitable tax receipt for your DAF contribution, while supporting as many charities as you’d like.
- Build a legacy of generosity by adding your children or grandchildren as successor advisors to your fund.
- Support charities anonymously, if desired.
Tax Planning Benefits
A Donor Advised Fund can help you align your charitable goals with your financial and tax-planning objectives, making it easier to steward your assets wisely and efficiently.
- Contribute appreciated assets to potentially reduce/eliminate capital gains taxes.
- Reduce taxable income during high-income years.
- Bunch charitable gifts to maximize deductions, while continuing annual support to charitiy.
Donor-Advised Funds vs. Private Foundations
A Donor Advised Fund offers several advantages when compared to a Private Foundation.
- Donor Advised Funds have minimal start-up and administrative costs compared to Private Foundations
- A separate 990 does not need to be filed with the IRS for Donor Advised Funds, meaning less public scrutiny and administrative overhead
- Grants made through a DAF can be completely anonymous
- Donor Advised Fund do not have annual minimum distribution requirements like that of private of foundations
- Donor Advised Funds provide greater tax deductibility in most cases
Contact our Planned Giving Team at: 800-782-8227 -or- FocusPlannedGiving@fotf.org
Disclaimer: Focus on the Family does not provide legal, tax, financial, or other professional advice. You should consult professional advisors concerning the legal, tax, or financial consequences of your charitable activities.
