What is a Donor-Advised Fund?
A donor-advised fund (DAF) is a tax-advantaged charitable giving account you can use for your charitable donations. A DAF is like an investment account, but one with a special purpose. Think of the DAF as its own charity. When you contribute funds to it, you receive an income tax deduction (consult with your tax advisor for eligibility requirements). You can then use funds in your DAF to make charitable gifts when you want to make them.
If you want to give to charity strategically and time your giving for maximum benefits, create a donor advised fund. Make the DAF the single recipient of your charitable contributions and advise it to make distributions to multiple charities when you want and to the organizations you want.
Why have a Donor-Advised Fund? Top 10 DAF Benefits for Donors
1) TIMING
If you want to make a gift this year for tax purposes but are unsure which charity you want to receive it (or when), you can contribute to your DAF and make the grant later.
2) PRIVACY
Your DAF can make gifts anonymously on your behalf.
3) SIMPLICITY
Rather than track your charitable giving to many organizations, you can give all your donations to the DAF, which consolidates and simplifies your recordkeeping, tracking your distributions for you.
4) LEGACY
You can name your children or grandchildren as co-advisors to the DAF, which helps instill a sense of family giving and a legacy for you and them. Bring them on the journey and joy of generosity. Giving from your DAF through your estate can also simplify your charitable estate bequests.
5) GROWTH
Investments over time can grow tax-free, which will allow you to give more for longer.
6) DEDUCTIBILITY
You may be entitled to take an immediate income tax deduction each time you make a gift. Contributions of appreciated capital assets avoid capital gains taxes.
7) FLEXIBILITY
You can give when and where you want. Take your time deciding how to designate your giving. There is no deadline for making immediate distributions.
8) VERSATILITY
You can make gifts to your DAF using cash, appreciated securities and a variety of other assets. You can make a gift of one large asset to fund multiple charitable interests. This is particularly helpful when donating stock.
9) “BUNCHING”
“Bunching” is an option that optimizes your charitable deductions for tax purposes. By combining multiple years of what you “normally” give to charity into a single year, you may be able to take advantage of the itemized deduction that year. If you give those higher amounts to charities in a single year, it can cause volatility in their budget. If you put it in your DAF, you get the tax benefit and then can still donate it to charities on your “normal” giving timeline.
10) FOUNDATION-LIKE
DAFs are a strategic alternative to the more costly, limiting private foundation option, yet can be utilized as a family foundation.
How does a Donor Advised Fund work?
A donor-advised fund is easy to create with a few simple steps.
- Set-up a DAF
- Make an initial gift of cash or an appreciated asset to fund your DAF. The assets in your DAF grow tax-free and earn interest.
- Make grant recommendations to Lake Lundgren Bible Camp from your DAF. Please note that our legal name is “ Lake Lundgren Bible Camp and our EIN is 39-6076927
- When you no longer are able, your heirs can continue to recommend charitable grants from your DAF if you choose.
Disclosure: The information provided is for general educational purposes only and should not be considered legal, accounting, or investment advice. Please consult with a qualified attorney, accountant, or financial advisor for guidance specific to your situation.
