Is a Donor-Advised Fund Right for Your Charitable Investing Goals?

Think of a donor-advised fund as a kind of charitable investment account. With a DAF, you’ve got a tool that you can solely use to support the charities and nonprofits that matter the most to you.

DAFs make you eligible for an immediate tax deduction if you donate cash, stocks, or non-publicly traded assets — like private business interests, cryptocurrency, and private company stock. Those funds can then be invested for tax-free growth, and you can recommend grants to almost any IRS-qualified charity.

When you contribute to a DAF, you’re making what’s called an “irrevocable commitment” to charity. In other words, the funds can’t be returned to you or any other individual. They also can’t be used for any purpose other than donations to charities.

Also, the CARES Act’s elimination of the percentage limitations for 2020 cash contributions doesn’t apply to contributions made to donor-advised funds or supporting organizations.

A DAF might appeal to you if you:

• Have a high-income year but distributed charitable intent.
• Plan relatively small annual charitable gifts and would otherwise not benefit from itemizing.
• Plan to fund many small charitable gifts with proceeds from securities.
• Have planned contributions that are insufficient to justify the costs of a private foundation.
• Want to avoid or be relieved of the administration of a private foundation.

How a DAF Works

As a donor, you

• Make a gift of cash, stock, or other assets.
• Receive immediate income tax deduction.

Then, the community foundation or third-party administrator:

• Distributes donations based on advice from the donor.
• Has the ultimate say in where the donations go, e.g., food pantries, churches, educational nonprofits, etc.

If you have questions about DAFs or any other charitable giving, please let us know.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.