The Many Benefits of Donor Advised Funds

Hi Friends,

This week we want to talk with you about Donor Advised Funds.

Donor Advised Funds, also commonly called a DAF, are the fastest growing charitable giving vehicles in philanthropy today. They are a special investment account that allows you to receive a charitable tax deduction in the year of your donation and then your funds will grow tax-free until you are ready to distribute part or all of your account to a qualified charity. There is now more than $230 Billion in these types of accounts as of 12/31/2022 and more than $52 billion in grants were paid out from DAFs in 2022.

This is how they work and how they can help you and the charities that you care about most.

First, you open a Donor Advised Fund account. At Presilium, we use Fidelity Charitable which holds more assets then any other donor advised fund. There is no minimum balance for this type of account.

Next, you can transfer cash, stock, private business interests, restricted stock and a variety of other assets and you will receive an immediate tax deduction.

The funds can then grow tax-free inside of your donor advised fund until you are ready to make a donation to a qualified charity. You can wait as long as you like to make your first donation.

A donor advised fund also makes record keeping easier. Rather than looking for every gift acknowledgement and receipt from the charities that you give to, you will only need the receipt from your DAF contribution.

Many people also make a donor advised fund part of their estate plan. You can name a successor who can continue your charitable legacy after you pass away.

The use of donor advised funds is especially beneficial when you are in a high tax bracket, would like to receive a tax deduction, but are unsure which charities you may want to give to. They can also be very useful in years when you want to make a Roth Conversion, are selling a business or highly appreciated stock. You can contribute to a DAF, receive the tax deduction immediately, and they begin to distribute the funds to charity in the future year or years that you are ready and may not benefit as much from deduction. This may allow you to give even more to your favorite charities.

We are happy to discuss donor advised funds in more detail with you and also compare them to other popular charitable giving accounts such as private foundations or charitable lead trusts. Many of our clients use a donor advised fund for our charitable giving and you may want to also consider it for yours.

Thank you and we look forward to talking with you next Friday

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