Donor Advised Funds

DAF stands for Donor Advised Fund, which is a type of charitable giving vehicle that allows donors to make tax-deductible donations to a fund that is then managed by a sponsoring organization, such as a community foundation or financial institution. Donors can then advise the sponsoring organization on how to distribute the funds to various charitable organizations.

When a donor contributes to a DAF, the donation is immediately tax-deductible, even if the donor does not specify which charities should receive the funds. The sponsoring organization manages the assets in the DAF, and the donor can make recommendations for which charities to support at any time. The sponsoring organization will then distribute the funds to the recommended charities, subject to any legal restrictions.

DAFs can be established with relatively low minimum contributions and offer flexibility in terms of timing and size of donations. They can also provide a way for donors to make a significant charitable impact over time, and potentially involve multiple generations of a family in philanthropic giving.

In summary, a DAF allows donors to make tax-deductible donations to a fund that is managed by a sponsoring organization, and to advise the sponsoring organization on which charities should receive the funds. DAFs can provide donors with flexibility, convenience, and potentially significant charitable impact.

Here's an example of a donor-advised fund (DAF):

Let's say John wants to make a charitable contribution of $50,000, but he's not sure which organizations to donate to. He could set up a donor-advised fund with a financial institution or a community foundation. John makes a donation of $50,000 to the fund and receives an immediate tax deduction for his donation.

After setting up the DAF, John can recommend grants to qualified charitable organizations from the fund's assets. He can take his time researching charities and can make grants to them at any time in the future, as long as they meet the IRS's guidelines for charitable contributions. The fund's sponsoring organization manages the investments and administration of the fund, so John doesn't have to worry about the paperwork or tax filings associated with each individual donation.

In summary, a donor-advised fund is a charitable giving vehicle that allows donors to make a tax-deductible donation to a fund, recommend grants to qualified charities over time, and let the fund's sponsoring organization handle the investment management and administrative tasks.