You have spent years living life and preparing for your retirement, putting funds aside to accomplish your goals, such as educational costs, travel, second homes, and supporting charitable causes important to you. How many times over the years have you given a donation to the Red Cross after a natural disaster, put a few coins in the Salvation Army Red Kettle during the holidays, participated in tithing, a food bank drive or attended a charity fund raiser for a cause you believe in? All of these are ways to ‘give back’ to causes and organizations that are important to you. What is next?
The benefits of a personal Donor Advised Fund (DAF)
Strategic charitable giving can be a great addition to your strategic plan. Understanding the benefits of a personal Donor Advised Fund (DAF) can potentially simplify your giving with a bigger impact to causes important to you, in a more flexible, tax-considerate way, that can include legacy planning and multi-generational philanthropy.
A DAF is a charitable giving account that allows you to donate assets into it at any time—i.e., cash, stock, bonds—and request donations to charities of your choice at any time. The gifts to the DAF are nonrefundable/irrevocable and characterized as charitable contributions on your taxes in the tax year you gift into the DAF. There is typically a $25,000 minimum to set up a DAF and is overseen by a “parent organization” responsible to ensure donations meet federal requirements and take care of administration activities.
Your DAF works in conjunction with your plan, and can be managed by your current financial advisor, along with your other assets. You have few responsibilities beyond donating funds and requesting how they are used. Highly appreciated stock is a great choice to donate to your DAF, eliminating any taxes owed on the capital gains of those assets. Setting up and donating from your DAF can be through “warm giving” (while you are living) or as part of an estate plan that would fund your DAF at death. You can give to multiple organizations or focus on one cause, specify organizations that continue to be supported after your death, and can even designate successor trustee(s) for your DAF—i.e., your children—to carry on your charitable work.
To learn more about the specifics on if a DAF is right for you, please review the Donor Advised Fund brochure.
To find out more about how to start your Charitable Giving journey, please visit the Charitable giving page on our website and download the Charitable giving wealth insights report.