A Donor Advised Fund (DAF) is a simple vehicle used to support public charities in a tax-advantaged manner.  The basic benefit to the individual giver is that you can contribute as much as you want now, be eligible for a current-year tax deduction, and then strategically grant your donations over a time frame that feels comfortable to you and your family.

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The donation takes effect for tax purposes as soon as you transfer cash or appreciated stock (or other asset types) to your account at a DAF.  Your grants (actual outgoing payments) can be made monthly, annually, or as one-offs, and all activity is recorded and tracked online for years to come.

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The most accessible DAFs are 501(c) charitable arms of well-known custodians, as they have relatively low contributions minimums (Schwab has recently reduced theirs to $0!):

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• Fidelity Investments Charitable Gift Fund

• Schwab Charitable Fund

• Vanguard Charitable

• National Philanthropic Trust (NPT)

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DONATING APPRECIATED STOCK 

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While there are limits to the tax deductibility of your donations (consult your CPA tax preparer), if you are holding stocks, mutual funds, or ETFs that have large gains, the tax code allows you to donate the securities themselves instead of selling them, paying the capital gains taxes, and then donating the proceeds.  Since the DAF itself is a 501(c)3 charity, it doesn't have to pay any tax on the gains either when they sell the securities.  There are simple calculators available to demonstrate this significant opportunity for donor and beneficiary.

 

WHY HAVEN'T I HEARD OF A DONOR ADVISED FUND BEFORE?  ARE THEY NEW? 

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DAFs have been around since the 1930s, were formally adopted as part of the Tax Reform Act of 1969, and have been a quiet tool of the wealthy and charitable families of America all along.

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With the rise of the mass affluent and technological advancements on custodian platforms, the popularity of DAFs has skyrocketed since the 1990s.

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For a comprehensive history, you can review this NPT annual report on DAFs.

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HOW DO I SET UP A DONOR ADVISED FUND FOR MY CHARITABLE GIVING?

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This is much easier than you would expect.  The process is no more complicated than opening up a brokerage account at your existing brokerage house.  Once your account is opened, you donate cash or stocks to the DAF, and you manage all of your giving from this separate account online.  The funds that remain in your account are invested in pools created by the DAFs (conservative pool, balanced pool, Socially Responsible Pool, etc), and include low-cost indexing options.

Contact your advisor for custodian-specific instructions, or schedule a time below so we can be of assistance.