Modern family giving includes a useful alternative to private foundations—donor-advised funds (DAFs). DAFs are easier to establish, require less money and involvement, and still provide important tax advantages. While often used by individuals, DAFs also provide a streamlined way for families to decide on grant recommendations together, aligning gifts with family values and priorities.
A DAF is a charitable giving vehicle that allows individuals or families to donate assets, receive an immediate income tax deduction, and then recommend grants to qualified charities over time. Each DAF is sponsored by a charitable organization that handles all administrative burdens and manages the assets, which can grow tax free within the fund. While specific rules and requirements (such as the minimum contribution amount) may vary depending on the sponsoring organization, the basics of DAFs remain the same.
Setting up a DAF:
- Choose a DAF sponsoring organization.
- Donate funds irrevocably earmarked for charitable giving, meeting the stated minimum contribution amount for your DAF.
- Make additional contributions at any time (if the DAF allows).
Making grants from a DAF:
- Recommend that the DAF make grants to specific qualified charities like ours at any time that works for you. (The DAF generally follows donor recommendations but is not required to do so.)
- Use the fund as an easy way to give without affecting your current finances, since the money has already been set aside for charitable giving.
Involving the family:
- Include family members, if you wish, in grant discussions and decisions, encouraging a shared philanthropic vision in alignment with family values.
- Name children as DAF successors to take over grant recommendations after your lifetime (if the DAF allows)—or you can name a charity like ours to receive all assets remaining in the DAF after you pass.
A DAF provides a more informal, accessible, and flexible framework for creating a charitable legacy that may be an ideal way to meet your family’s charitable goals. Click here for more information.