There are many different ways to support organizations and causes that share your family’s values, but one that is growing in popularity is the Donor Advised Fund (DAF). Before deciding whether or not to use a DAF, consider the type of assets that you would like to donate, the size of your gift and the timing of your gift.
Many folks take advantage of donor-advised funds (DAFs) to simplify their giving and take an immediate tax deduction. DAFs let the donors set the pace in determining recipients and distributing funds. There are no IRS requirements for minimum annual distributions. These and other features have made DAFs the fastest-growing giving vehicles in the U.S., says Kiplinger’s article “Are Donor-Advised Funds the Best Charitable Giving Vehicle for You?”
DAFs are maintained by major financial institutions like Fidelity and Vanguard. They manage the recordkeeping and tax reporting for a fee. Contributions within these accounts can be invested to the donor’s specifications and grow tax-free.
As far as IRS value calculations, directly donating securities is like donating cash. The charity has to be set up to accept publicly traded or private securities. The donations of securities and other appreciated assets are limited to 30% of adjusted gross income (AGI), and cash donations are limited to 50% of AGI. The same limits apply to DAFs. Moving appreciated stock into a DAF results in the donor taking an immediate tax deduction for its full market value and protection against the tax-dollar hit. DAFs have no payout requirements in terms of timing or funding, so the donor can take time to plan the charitable distributions.
The benefits of direct giving include writing a check, making a contribution with a credit card, or donating a used vehicle, which you can do on the last day of the year for tax purposes. Writing a check is still the simplest option for many, but the catch there, is that you have to do the recordkeeping.
Wealthy families who are in the public eye, often chose DAFs because the donation is made through the financial entity that holds the DAF, which means that the donation is completely private. Another nice feature: you can make the DAF a family affair, naming it after your family, having members of the family work to create a mission statement and decide what cause or causes the family wishes to support.
Reference: Kiplinger (November 2016) “Are Donor-Advised Funds the Best Charitable Giving Vehicle for You?”