What Is a Donor-Advised Fund (DAF) and How Do They Work?

Your heart is in the right place, but you might be doing it wrong.

Americans love charitable giving.

About 69% of us regularly donate to organizations we truly believe in.

In this illustration, a person adds dollar coins into a jar full of hearts meant to represent giving to charity.

What is a Donor-Advised Fund?

Choosing a cause to get involved in can take a lot of time to contemplate.

Heres the deal: Donor-advised funds (DAFs) essentially act like investment accounts for charitable giving.

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That means you might have an even more significant impact on the charitable organizations you care about the most.

Are they in it for charity, or just the sweet tax benefits?

Thats because youre not required to grant out your contributions periodically, as you are with private foundations.

Fortunately, DAFs do have a higher payout rate to charities than private foundations.

Theres also the issue of control.

That said, grants are very rarely denied, usually only for fringe legal reasons.

Oftentimes funds are transferred the very same day.

And you’re able to choose from more than a million charities to support.

They wont pressure you to constantly fund your account or burden you with a huge minimum contribution.

Your recipients will get every cent of the funds you grant out of your account.

Here are some answers to some of the most popular questions about DAFs from around the web.

you’re free to contribute as much cash or assets to a donor-advised fund as youd like.

However, there are upper limits for the tax benefits you could enjoy from your contributions.

For non-cash contributions, you could claim a tax deduction of up to 30% of your AGI.

Yes, but you’re free to immediately claim a tax deduction on your contributions.

This ensures your charitable giving legacy.

It sounds appealing right?

Check it out here!