‘Tis the Season for Giving – Consider Donor-Advised Funds

As the world becomes more connected and information from one corner travels at the speed of light to another, the need for charitable giving has become ever more apparent.   The good news is that people are giving more than ever before, and the level of philanthropic gifts has continued to hit new highs.  One method, donor-advised funds (DAFs), is growing in popularity.

What is a donor-advised fund?

A donor-advised fund (DAF) is a special fund or account that allows you to deposit assets for charitable contributions and receive an immediate tax deduction. Then, in the future, direct those contributions to other charities as frequently as you like. 

How does a donor-advised fund work?

A DAF is like an investment account for the sole purpose of receiving your charitable contributions, then supporting charitable organizations you care about over time. It is maintained and operated by a sponsoring organization, a section 501(c)(3) organization established to sponsor and act as administrator for DAFs.

When you contribute cash, securities, or other assets to the DAF, you are eligible to take an immediate tax deduction. Those assets can be invested for tax-free growth, and you can then direct charitable gifts to any IRS-qualified charity from the account.

What are the benefits of donor-advised funds?

There are many reasons donors choose to use a DAF as a philanthropic giving vehicle, including:

• Flexibility in the types of assets that can be contributed, from cash to securities to complex or illiquid assets
• Maximizing the tax benefit associated with charitable giving
• Continuing to grow your donation tax-free to fuel future charitable grants
• Empowering your estate and legacy planning

The impact of DAFs on the world of philanthropy is growing as more donors turn to DAFs to meet their philanthropic goals.  Today they are philanthropy’s fastest-growing vehicles.  They allow active donors to support a wide range of causes in an effective and efficient method of charitable giving.  Speak with your financial advisor to learn if they are the right tool for you.

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