Your Simple and Flexible Charitable Account: The Donor-Advised Fund

My last article discussed unique ways to give to charity.?One of those ways was a Donor-Advised Fund (DAF).?

A DAF is a simple, sustainable, and flexible option for charitable giving.?Think of it as your personal or family’s charitable account to help you support the causes you care about the most.?

A DAF is a tool that acts like a private foundation, without the initial and ongoing costs and administration.?Simply, a DAF is a structure for a charitable gift, with funding coming from a variety of sources.???

So what are the advantages of a DAF??

1. The tax receipt - When you make a donation to a donor-advised fund, you will receive a donation receipt equal to the value of the donation. ?
2. Flexibility - unlike a gift directly to charity, you aren’t required to donate the funds immediately.?Funds can remain in the DAF, invested or otherwise, and dispersed over time.?This allows you to separate the tax receipt from the timing of the gift.?
3. Low cost and simplicity - a DAF is a much lower cost option to a private foundation and is relatively quick to establish
4. Legacy - from the name of your account to naming a successor donor, a DAF can be incorporated into your family's legacy
5. Anonymity - If you want, your disbursements from the DAF can be anonymous?

Funding for a DAF can come in a number of ways, including cash, securities, insurance, gift via your will, or others.?Gifts are irrevocable and a DAF can be set up by a corporation or an individual.?KCI and the CAGP Foundation have developed a nice summary of the steps involved with a DAF: ?

Source: KCI and the CAGP Foundation “Influence, Affluence & Opportunity: Donor-advised Funds in Canada”?

Who could benefit from a DAF? If you currently have a tax event, think sale of business or disposition of property, then a DAF could be a tool used to offset your taxes owing.?Especially if you don't want to give all the money away at that time.?Alternatively, perhaps you are interested in creating a family legacy of generosity with a flexible giving vehicle. ??

In an interesting stat from Mackenzie Investments, Canadians typically aren’t aware of a DAF, but would consider using them after understanding more: ?

Source: Mackenzie Investments?

The misconception is that a DAF, or foundation, is only accessible to the wealthy. That is simply no longer true given the current options. DAFs are a fantastic solution to create a meaningful legacy without going through the hassle and expense of a private foundation. ?

This article just scratched the surface of what is possible with a DAF and if you are interested in proceeding with a DAF solution, there are many different providers. From community foundations, in-house options, financial institutions, and more.?With varying terms and conditions regarding minimum contributions, granting requirements, etc., it would be best to consult with your advisors before selecting an option. ?

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