Is A “Donor-Advised Fund”Right For You?

By definition, a Donor-Advised Fund (DAF) is a charitable giving account that allows donors to make a charitable contribution, receive an immediate tax deduction, and recommend grants to qualified charities over time. It is established under a public charity, such as the Community Foundation of the Ozarks, which manages the fund’s administration and investments.

Top 5 Benefits of a DAF:

1. Immediate Tax Benefits

Donors receive a tax deduction for contributions in the year they are made, even if the funds are distributed to charities later. This allows for strategic tax planning.

2. Flexibility in Timing

Donors can contribute during high-income years to maximize tax benefits while deciding on recipient charities at a later date, giving time to align philanthropic goals with strategic giving.

3. Investment Growth

Contributions can be invested within the DAF, potentially growing tax-free and increasing the amount available for future charitable grants.

4. Simplicity and Convenience

The sponsoring organization handles record-keeping, tax receipts, and grant distribution, streamlining the charitable giving process for donors.

5. Legacy Building:

DAFs can serve as a vehicle for multi-generational philanthropy, allowing families to work together on charitable giving and create a lasting legacy.

Donor Advised Funds are an excellent tool for strategic, flexible, and tax-efficient charitable giving. However, they are not suitable for every scenario. Situations like making qualified charitable distributions or taking advantage of state tax credit programs require direct contributions. Understanding these nuances ensures that donors choose the most effective method to achieve their philanthropic and financial goals.

If you have questions and would like to consult our team about DAFs, please feel free to reach out at [email protected]