Essentials of Donor-Advised Funds

Why are DAFs so popular for charitable giving?
- Tax Deductions: Clients can claim up to 60% of AGI for cash contributions and 30% for securities held for over a year. Unused amounts can be carried forward for up to five years.
- Capital Gains Benefits: Donating appreciated assets avoids capital gains taxes, particularly beneficial for highly appreciated or concentrated holdings.
How can DAFs offset high-income years?
- Fund a DAF during peak earning years to take advantage of deductions, then distribute grants over time.
- This approach aligns well with retirement planning, ensuring cash flow during retirement years.
What advantages do DAFs have over private foundations?
- Ease of Management: Lower costs and simpler administration.
- Anonymity: Allows donors to avoid being added to marketing lists or publicizing political or religious views.
- Collaboration: Complements private foundations for anonymous giving or excluding gifts from 990 forms.
What considerations should donors keep in mind?
- Contributions are irrevocable, and assets are no longer owned by the donor.
- Investments are subject to market risks and include management and administrative fees.
- Qualified Charitable Distributions (QCDs) are not allowed into a DAF.
Who can benefit from using a DAF?
- Donors seeking flexibility, tax efficiency, and a streamlined approach to charitable giving.
- Families looking to make an impactful charitable legacy with minimal administrative burden.