A Donor Advised Fund (DAF) is becoming a popular way to accomplish tax efficient charitable giving. Essentially, a DAF is a charitable giving account administered by a sponsoring organization (Sponsor), usually a brokerage firm or community foundation.
Generally, you as the Donor, contribute stock, cash or other assets to the DAF, receive an immediate tax deduction and later recommend grants to IRS qualified charities, such as the Cutaneous Lymphoma Foundation, over time.
DAFs are relatively inexpensive and easy to establish. The Sponsor handles administration, tax reporting, investment management, and grant processing. Instead of keeping records for all your charitable gifts each year, you receive one tax receipt from the Sponsor.
You can contribute appreciated securities or other appreciated assets and often avoid capital gains taxes while receiving an immediate charitable deduction for the full fair market value of the asset, even if the grants to the qualified charities are distributed years later. Tax deductions are tied to the date the contribution is completed, not when grants are distributed.
DAFs are flexible. You may contribute assets to a DAF during a high-income year to secure a tax deduction, then decide gradually which charities to support. Funds remain invested and potentially grow income tax free while awaiting distribution.
Once the asset is contributed, the donation is irrevocable, and you no longer legally own the money.
Although you can recommend grants, the Sponsor has final legal control over distributions. In practice, Sponsors almost always follow Donor recommendations if the recipient is an IRS qualified charity, and the request complies with law. To help ensure funds ultimately go where intended, you should carefully review the Sponsor’s guidelines and any restrictions. Naming successor advisors is also important so family members or trusted individuals can continue recommending grants after your death.
Lastly, fees must be considered as most Sponsors charge administrative and/or investment fees.
Donor Advised Funds allow individuals and families to organize long-term charitable giving in an efficient and tax-effective way.
Families sometimes create written mission statements to guide future generations.
The Cutaneous Lymphoma Foundation has an account set up to receive DAF distributions: Easy DAF
If you wish to discuss how to use a DAF to benefit the Foundation, please contact us at info@clfoundation.org.
The above summary is provided for informational purposes only and is not intended to be legal, tax or investment advice. Please contact your attorney or financial advisor regarding your personal circumstances.