Donor Advised Fund (DAF)

A Donor Advised Fund (DAF), which is like a charitable savings account, gives you the flexibility to recommend how much and how often money is granted to the Society of Sponsors and other qualified charities. You can recommend a grant or recurring grants now to make an immediate impact or use your fund as a tool for future charitable gifts. You transfer cash or other assets to a community foundation, financial services firm or other sponsoring organization. You can then recommend—but not direct—how much and how often money is granted.

You can centralize your giving with DAFs. Your financial and charitable goals reflect your commitment to support the future of your loved ones, charitable organizations you value, such as the Society of Sponsors, and the greater community. But sometimes it can be difficult to keep track of the organizations you wish to support and the documents required to receive your benefits from charitable gifts. A convenient and easy way to organize your charitable intentions is to create a DAF. Consider it one-stop giving.

Setting up a DAF qualifies you for a federal income tax charitable deduction when you make a gift to the fund—without immediately having to choose the charities you want to support. If you so choose, you can support a number of charitable organizations without having to retain records for a number of separate contributions.

HOW IT WORKS

Step #1: You open a DAF through written agreement with a community foundation, financial services firm or other sponsoring organization. Most DAFs require a minimum gift to open your fund, although additional contributions may be less.

Step #2: You name your loved ones as your successor to continue to recommend grants to charitable organizations, or you can name The Society as a beneficiary to receive all or part of your account after your lifetime. 

Step #3: You may make contributions to your fund at any time. Your contributions are invested by the sponsoring organization, which provides regular accounting to you.

Step #4: You qualify for a federal income tax charitable deduction for each gift to your donor advised fund.

Step #5: You make recommendations that various amounts be distributed to charitable organizations of your choice. However, by law, you cannot direct distributions.

Advantages

Donors have the option to keep donations anonymous if they prefer privacy. These funds are flexible — you can add to the fund at any time, and you don’t need to have a specific purpose for each gift. And again, the funds offer the simplicity of keeping a multitude of philanthropic activities organized in one stream of documentation and finances.

ADDITIONAL CONSIDERATIONS

Where to find DAFs.
Start by exploring options through your local community foundation or nonprofit organizations that offer them. Not all nonprofits host DAFs, so availability may vary. Financial services firms also offer a growing number of national donor advised funds.

Evaluate the sponsoring organization carefully.
When you make a gift to a donor advised fund you irrevocably give away your money or property. Make sure the organization you select is one that supports your values.

Understand the fund’s policies and procedures.
Minimum contributions, as well as the amount and frequency of grant recommendations, all vary depending upon the sponsoring organization.

Consider costs and investment results.
All donor advised funds charge administrative fees that can vary considerably. In addition, investment performance will vary from one donor advised fund to the next, affecting the amount that will actually be distributable to a charitable organization.

Disadvantages
Because these funds are managed, they have administrative fees. There are also minimums for establishing a fund, with possible minimums for future donations. You also retain less control than other gift vehicles, as donations are irrevocable. And you can only recommend distributions to the managing organization; you cannot direct them.

For further information, please contact The Society’s Finance Chair at:

financesocietyofsponsors@gmail.com

Thank you.

Information contained herein was accurate at the time of posting. The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. State law may further impact your individual results.