What is a DAF?
A Donor-Advised Fund (DAF) allows donors to make a charitable contribution to a fund held at a public charity. The donor can then advise on the distribution of funds to different nonprofits over time, while immediately receiving a tax deduction in the year the contribution is made.
Why are DAFs popular?
People love DAFs for the immediate tax deduction and the flexibility to distribute funds to nonprofits over time. Plus, the ability to invest idle assets in portfolios, allowing donors to give more to their favorite nonprofits.
Why haven’t I heard of DAFs before?
Traditional DAFs often require a large minimum donation and are usually recommended by financial advisors for philanthropy-minded clients. Digital-first platforms may have lower minimums to enable access for a wider donor base.
What kind of investments can DAFs make?
DAF sponsors offer various investment options to allow donors to grow their impact. This can include a range of traditional stocks and bonds, to more innovative options like ESG funds, and digital assets, depending on the sponsors’ capabilities.
What should I donate to a DAF?
The best assets to donate are highly appreciated assets that have been held for more than a year, like stocks and cryptocurrencies.
Are there fees for DAFs?
Yes, DAF sponsors charge administrative and investment fees, typically as a percentage of assets under management (AUM), varying by sponsor. How does a DAF get distributed?
Donors recommend nonprofits and donation amounts to the DAF administrator, who then runs a due diligence and fund distribution process. Donors can opt to be anonymous and may also guide how the funds should be used by the recipient organization.
What isn’t eligible for a DAF donation?
- Donations to individuals
- Membership or tickets
- Political donations