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Don’t be Daft, use a DAF: Donor Advised Fund

Don’t be Daft, use a DAF: Donor Advised Fund

Are you charitably minded? Do you have a plan in place for giving? Does it include a Donor Advised Fund?

  • ✅ Charitably Minded 
  • ▢ Plan for giving 🫣
  • ▢ Donor Advised Fund 🤔

Fear not! This week’s podcast is for you. First, you will learn what a Donor Advised Fund (DAF) is and then I will give you nine reasons you should be using one. 

What is a Donor Advised Fund?

Let’s begin with the what: A Donor Advised Fund, very simply, is an account that you own similar to a checking, savings or brokerage account. Once you open a DAF, you can transfer money into that account in the form of cash, stocks, bonds, cryptocurrencies, etc. When you transfer assets into a DAF, they become a charitable gift, even though the account is still in your name. For example, if you take 100,000 shares in Exxon worth one dollar each and transfer them into your DAF, you immediately create a $100,000 charitable donation, even though the charity doesn’t have the money yet. 

You then have the flexibility to give donations from your DAF directly to the charity of your choice at any time. You could leave the money in the DAF and let it continue to grow and donate a year or two (or ten or 50) down the road, or give it to the organization immediately.

Nine Reasons to Use a Donor Advised Fund

Why go through the extra step of putting your donation into a DAF instead of sending it directly to the organization you want to support? Good question, and here are nine reasons why a DAF might be a good option for you.

  1. Tax-friendly: The contributions to a DAF are charitable donations, so you get to take those off your tax return, saving on income tax!  (Assuming you get over the standard deduction)
  2. REALLY tax-friendly: You can avoid paying capital gains on appreciated stock by transferring it to a DAF. 
  3. Easy: Opening a DAF is as easy as opening a savings account. A couple of clicks and you are ready to transfer. A DAF also makes transferring stock extremely easy and allows you to keep track of your donations for tax reporting.
  4. Flexible: You don’t have to make all your decisions at once. You can deduct your contribution now and give to charities later. If you have a high-income year, say from an inheritance or the sale of an asset, you can transfer some of that to your DAF for future donations and reduce your income in the current year.
  5. Grows: The donations you set aside in a DAF can be invested and continue to grow.
  6. Plan: Do you get a yearly flier reminding you of the Firefighter Association’s need for donations but forget to add it to your budget? If you have a giving plan, you will always have the ability to donate. A DAF encourages regular philanthropy.
  7. Educate: Involve your family in giving decisions. Family members can be named Successor Advisors to your fund so the next generation can carry on your charitable legacy.
  8. Wide Range of Assets: Beyond cash, DAFs often allow contributions of various types of assets such as stocks, real estate, or even closely held business interests, which may not be as easily accepted directly by charities.
  9. Legacy: Your charitable giving can continue even after your death

Bonus number 10, Private: Do you get inundated with yearly requests for donations? Using a DAF can help by keeping all your transfers completely anonymous.

DAFs are gaining popularity. According to the National Philanthropic Trust, the number of DAF accounts more than doubled between 2018 and 2022, topping out at almost two million by the end of 2022. DAFs are a great way for you to plan your charitable giving and take advantage of the various tax benefits to share your wealth with those in need.

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Don’t be Daft, use a DAF: Donor Advised Fund

Episode 140 •

23rd April 2024