A donor-advised fund (DAF) is a philanthropic vehicle that allows individuals, families, or organizations to make charitable donations while retaining certain controls over how those funds are distributed. It offers a flexible and efficient way to manage charitable giving.
How It Works
- Establishing a Fund: To create a DAF, you typically open an account with a sponsoring organization, such as a community foundation or a financial institution that offers philanthropic services. You can contribute cash, stocks, or other assets to your fund.
- Tax Advantages: When you donate to your DAF, you receive an immediate tax deduction for the full amount, subject to IRS limits. This makes it a strategic option for maximizing tax benefits, especially in high-income years.
- Investment Growth: Once your contributions are in the fund, you can invest them in various options provided by the sponsoring organization. This allows your charitable assets to grow over time, potentially increasing the amount available for future donations.
- Grant Recommendations: As the donor, you have the ability to recommend grants to your chosen charitable organizations. While the sponsoring organization has the final say on the distribution, they generally honor the donor’s recommendations.
- Flexibility: DAFs offer flexibility in timing. You can make contributions in one year, receive the tax deduction, and decide later which charities to support, allowing you to be strategic about your philanthropic impact.
- Ongoing Engagement: Many donors use DAFs to involve family members in charitable giving, fostering a culture of philanthropy and allowing for discussions about which causes to support.
For further information, visit Schwab DAFgiving360.