Five Great Reasons for using a Donor Advised Fund
I’ve seen Donor Advised Funds (DAFs) referred to as the “bullet train” of philanthropy. Charitable-minded people for generations have created private foundations to manage their gifting – but DAFs have recently hurtled past foundations in popularity. 22% of all charitable giving goes to DAFs now, whereas 15% goes to private foundations. Their ease and convenience make them very attractive to anyone from a mega-donor to someone who only has hundreds of dollars to create a giving program.
Here are five reasons to expect they’ll only grow more popular:
SIMPLICITY
One of the key benefits of a donor advised fund is its ability to simplify charitable giving. Donors can make a one-time contribution to their DAF and then recommend grants to multiple charities whenever they choose. This streamlines the giving process and eliminates the need to keep boxes of receipts and track down documentation from every charity you give to. Many DAF providers have simple technology where a donor can complete a charitable distribution in a couple mouse clicks.
FLEXIBILITY AND CONTROL
Additionally, a DAF provides donors with a greater level of flexibility and control over their charitable donations. Donors can contribute a wide range of assets to the fund, including cash, securities, and even appreciated assets like stocks or real estate. I even donated some highly appreciated Bitcoin to mine this year. As the donor YOU choose when and how much to distribute to charities, allowing you to make strategic decisions based on your financial circumstances and charitable priorities.
DID WE MENTION TAX ADVANTAGES?
Another significant benefit of a DAF is its tax advantages. Donors receive an immediate tax deduction for their contribution to the fund, which can help reduce their taxable income in the year of the donation. Donors can pile a large amount of charitable gifting into one year, optimally one where they are in a high income tax bracket, like when they sell a business or inherit money in an IRA.
TAX-FREE GROWTH
Furthermore, a DAF provides donors with the opportunity to grow their charitable contributions over time. The assets in the fund can be invested and potentially grow tax-free, allowing donors to make larger grants to charities in the future. This can have a significant impact on the organizations and causes that donors care about most.
PLANNING OPPORTUNITIES
Lastly, a DAF can help facilitate a more strategic and thoughtful approach to charitable giving. By carefully planning and considering their grant distributions, donors can ensure that their contributions have the greatest impact and align with their values and philanthropic goals.
From simplifying the giving process to providing tax advantages and facilitating strategic giving, a DAF can be a valuable tool for donors who are looking to make a difference in their communities and beyond.
