A Donor-Advised Fund (DAF) is a type of giving vehicle that allows donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time to charities of their choosing. Donor-Advised Funds are administered by public charities such as community foundations or commercial organizations like Crewe Foundation.
How Do Donor-Advised Funds Work?
Donor-Advised Funds are established with a minimum contribution of $5,000. These contributions can consist of cash, publicly traded stock, real estate, closely held businesses, cryptocurrency, and many other types of appreciated assets. Donors can then recommend grants to their favorite charities at any time. The Donor-Advised Fund issues the grant on behalf of the donor.
What are the Benefits of a Donor-Advised Fund?
There are many benefits of using a Donor-Advised Fund to support your philanthropic goals, including:
- Donors can make a contribution to a Donor-Advised Fund and receive an immediate income tax deduction on fair-market value, bypass capital gains tax, and bypass estate tax on contributed assets.
- Donors can recommend grants from their Donor-Advised Funds to support their favorite charities over time.
- Donors can receive professional advice from the staff of the Donor-Advised Fund on how to maximize their charitable giving and increase their impact.
- Donors can choose anonymity if they wish.
- Donors can establish a Donor-Advised Fund with as little as $5,000.
While these are just some of the advantages of a Donor-Advised Fund, you may qualify for additional benefits. If you have questions about potential tax implications and which benefits you are eligible for, please give us a call.
What Charities Can I Contribute To?
Donor-Advised Funds can support any IRS-qualified public charity. This includes most 501(c)(3) organizations such as religious organizations, educational institutions, hospitals, and environmental groups. Donor-Advised Funds cannot support private foundations or political organizations. Crewe Foundation has a wonderful database at your disposal of responsible and effective charitable organizations that its donors have gifted to over the years.
If you have questions about eligible charities and organizations, a Crewe Foundation advisor would be happy to assist.
How is a Donor-Advised Fund Different From a Private Foundation?
There are several key differences between Donor-Advised Funds and private foundations, including:
- Donor-Advised Funds are administered by public charities like Crewe Foundation and qualify for public charity tax benefits (the highest levels offered by the IRS). Private Foundations are typically administered by an individual, family, or corporation and have greater limitations on the tax deductibility of gifts.
- Donor-Advised Funds are extremely cost-effective allowing nearly anyone to participate. Private Foundations have higher setup costs and administration costs that make smaller donations unfeasible.
- Donor-Advised Funds allow donors to make a charitable contribution and receive an immediate tax deduction, while private foundations do not.
- Donor-Advised Funds can support any IRS-qualified public charity, while private foundations typically have more restrictions on which charities they can support.
- Donor-Advised Funds offer donors professional advice from the staff of the fund on how to maximize their charitable giving, while private foundations typically require hiring an attorney or tax professional.
Donor-Advised Funds at Crewe Foundation
If you are considering opening a Donor-Advised Fund, have additional questions, or are in need of clarification on the finer points of your DAF account, we’d be happy to help. You can read more about Donor-Advised Funds here, or contact us to speak with a Crewe Foundation advisor today.