A Donor Advised Fund (“DAF”) is a giving plan that provides the giver immediate tax benefits and the input on future distributions.
A DAF is established through gifts to a public charity under an agreement in which the giver retains for himself/herself, and possibly others, the right to make recommendations for future distributions out of their DAF to other charitable organizations. Those recommendations can be for distributions of the DAF’s income and/or principal.
Gifts to a DAF are deductible in the year you make them, whether or not there is any charitable distribution out of the DAF during that year.
A DAF is a good charitable giving plan for people who want flexibility in timing their charitable support. A gift can be made to your DAF at a time when it may be most advantageous for tax-planning purposes without having to immediately decide what charitable causes/projects the gift will ultimate support.
A DAF can also be an excellent tool for teaching philanthropy to children. Including children as “advisors” of the family’s DAF gives them the opportunity to learn first-hand, as the family makes decisions about charitable distribution recommendations together, how their parents approach philanthropy, which organizations they value most and why, and what their parents expect from charitable organizations they support.
Donor advised funds provide flexibility in timing your philanthropic support to charitable causes important to you and a method for “growing” giving children.
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The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.