A donor-advised fund (DAF) is a charitable giving account established at a public charity. It allows donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund to their preferred charities over time. The contribution a donor makes to their DAF is 100% irrevocable and destined for a final 501(c)(3) organization. A DAF begins with a donor contributing cash or assets to a public charity, which creates a separate account for the donor. The donor can then recommend grants from the fund to their preferred charities over time.
DAFs provide a flexible way for donors to pass money through to charities, an alternative to direct giving or creating a private foundation. Donors enjoy administrative convenience, cost savings, and tax advantages by conducting their grantmaking through the fund. A DAF can be structured in a way that best meets the donors charitable goals, including naming the DAF anything they like, appointing friends and family members to help manage the responsibilities of the DAF, and designing a Legacy Plan to determine what will be done with the DAF assets beyond the donor's lifetime.
DAFs have become popular in part because of their versatility, allowing donors to give when, what, how, and where is most favorable for them. They offer tax advantages of up to 60% of adjusted gross income and can hold funds indefinitely. Donor-advised funds also accept non-cash assets, such as stocks, mutual funds, and bonds, as well as complex assets, such as private S- and C-corporation stock. Although the sponsoring organization controls the money in the DAF and the investment options, the donor gets to recommend which investments to use.
