WHAT IS A DONOR-ADVISED FUND?
A donor-advised fund (DAF) offers an easy way for a donor to make significant charitable gifts over a long period of time. A DAF is similar to a private foundation but requires less money, time, legal assistance, and administration to establish and maintain. A DAF also enjoys greater tax advantages than a private foundation.
Technically, a DAF is an agreement between a donor and a charity that gives the donor the right to advise the charity on how the donor’s contributions to the charity will be distributed to other charities. Contributions may be tax deductible in the year they are paid to the DAF if they are structured so that they are not considered earmarked for a particular distributee.
During life, a donor (or a donor’s designee) can make ongoing, nonbinding recommendations to the DAF as to how, when, and where grants from the fund should be made. Additionally, the donor can offer advice to the DAF regarding how contributions should be invested.
