Discover how Donor-Advised Funds work
A Donor-Advised Fund (DAF) is a charitable giving vehicle administered by a public charity that allows donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time to charitable organizations.
This tool is ideal for managing larger donations that can be distributed to multiple charities over a period, allowing for strategic philanthropic planning.
Key Characteristics of Donor-Advised Funds
- Separately Identified: The fund is separately identified by reference to contributions of a donor or donors.
- Owned and Controlled: The fund is owned and controlled by a sponsoring organization, typically a public charity.
- Advisory Privileges: The donor, or a person appointed by the donor, has or expects to have advisory privileges concerning the distribution or investment of the funds held in the DAF.
Benefits of Using a Donor-Advised Fund
- Immediate Tax Deduction: Receive a tax deduction in the year you contribute to your DAF, regardless of when grants are made from the fund.
- Simplified Giving: Manage your philanthropy through a single contribution that can be allocated to various charities over time.
- Flexible Timing: Decide when grants are made to suit your charitable giving goals and financial planning needs.
Important considerations
It’s important to choose a reputable sponsoring organization that aligns with your philanthropic interests and provides the administrative support needed. The funds in a DAF are irrevocably committed to charity, meaning once contributed, they cannot be returned to the donor.
There are exceptions to Donor-Advised Funds, including:
- Funds that make distributions only to a single identified organization or governmental entity.
- Funds where the donor or donor advisor gives advice about which individuals receive grants for travel, study, or similar purposes, provided certain conditions are met.
For more detailed information, please refer to the IRS Donor-Advised Funds Page and the IRS Form 990 Instructions.