A Donor-Advised Fund (DAF) is an account set up at a sponsor firm, such as Fidelity Charitable, Vanguard or Scwab, with the specific purpose of supporting organizations you care about.
You can fund a DAF account with cash, securities, or other assets, and you are typically eligible to take an immediate tax deduction. The assets in a DAF can grow tax-free as you consider grants to eligible organizaitons, like NSRWA. When you wish to make a grant to a non-profit, you simply notify the sponsor firm of your recommendation, and the sponsor firm then distributes the grant directly to the organizaiton.
DAFs are the fastest-growing giving vehicle because they are one of the easiest and most tax-advantageous ways to give. Using appreciated assets to fund your DAF often avoids capital gains, while you still receive the full market value deduction. And DAFs still allow you to time the distrubtions to your favored organizaiton.
Sometimes an anticipated windfall from the sale of a business or other large investment will spur people to fund a DAF. If this is the case, ask your financial advisor for details on the pros and cons of establishing a DAF before or after the sale. For a deeper dive into these efficient and flexible tools, click here – Funding a DAF with Appreciated Securities
The content here is provided as a guide to help laypeople understand some of the fundamentals of tax-efficient giving based on current laws and regulations which may change without notice. Content here should never be considered or counted on as professional advice. Always seek qualified advice from legal, tax, and accounting professionals for your own personal situation.