Charitable giving has always been part of the American spirit, but the way people choose to give is changing. Many people are turning to donor-advised funds to assist their charitable efforts.
According to the National Philanthropic Trust’s Donor-Advised Fund Report, nearly $54.77 billion was the estimated amount of charity in 2023. So, if you’ve been hearing about DAFs and wondering what the deal is, here’s a straightforward breakdown.
What Is a Donor-Advised Fund?
A DAF is a charitable investment account. It’s like a savings account, but instead of saving up for a vacation or a new car, the money is meant for charities. They are distributed to nonprofits or charitable causes.
How do DAFs work?
At any sponsoring public charity DAFs account, you contribute personal assets like money or any investments. Then you receive an immediate tax deduction. After this, you can pay your grants to any charity of your choice. The sponsor, the organization managing the DAF, handles the process of compliance, record keeping, and actually sending out the grants.
You don’t have complete control once you’ve made the donation. But, you have the power to decide how it is invested and which organizations eventually receive it.
Key benefits of a Advised Fund
So what makes donor-advised funds so appealing? Here are some reasons why people consider DAFs:
-
They’re Easy to Set Up
Charitable giving takes up a lot of time, which can be frustrating for busy people. As DAFs are handled by sponsoring organizations, you don’t have to spend hours managing them.
-
Tax-Free Growth
Your money or assets can be invested and have the potential to grow without any tax. That means more money goes to charities over time.
-
Flexibility in Charity
You’re not limited to just writing a check. DAFs accept cash, yes, but also real estate, securities, and even business interests.
-
Eligible for charitable tax deductions
One of the biggest perks is that if you donate appreciated assets, you can deduct the full fair market value and avoid paying capital gains tax when the assets are sold.
-
24/7 access
DAFs ensure 2424/7 access through digital platforms, which allows donors to make grants at any time.
-
Ability to engage your family in philanthropy
Many people like that DAFs can carry on their charitable vision. Children can participate in grantmaking. You can name heirs to take over grantmaking after you’re gone, or leave a bequest in your will to continue the giving.
-
Maximized Community Impact
The sponsor community helps you assess investment opportunities. In this way, you can connect with people and needs that align with your charitable interests.
-
Privacy Options
The sponsoring organizations offer donors exceptional privacy and anonymity. You can remain anonymous to charities.
Final Thoughts
The donor-advised funds give everyday donors the chance to structure their generosity in a way that’s smart, sustainable, and inspiring for the next generation. It’s simple, flexible, and it just might help you turn good intentions into lasting impact.