If you are seeking simplicity for your charitable giving and immediate tax benefits, a donor-advised fund (DAF) may be right for you. A DAF is like a charitable investment account for the sole purpose of supporting charitable organizations you care about. A DAF can provide you with immediate tax benefits while making your charitable giving easier for years to come.
What is a DAF?
A donor-advised fund is an account created by a donor though a sponsoring organization, such as a community foundation or charitable affiliates of many investment firms. The terms of agreement give the donor, or sometime others, the right to recommend charitable grants from the DAF.
How does it work?
You make an initial contribution of cash, stock, or other assets to your account. Your contribution is irrevocable and you receive an immediate income tax charitable deduction for your contribution. The DAF sponsor invests and manages the donor-advised fund and allows you, as the advisor, to recommend grants to qualified charities in amounts and at times you choose.
What are the advantages of a DAF?
A key advantage is the opportunity to separate the timing of your tax-deductible contribution from your decisions about which specific charities you wish to support. This can be especially helpful if, for example, you have a financial event like the sale of a business that results in a larger than usual tax liability; you could make a substantial charitable contribution to a DAF and use the income tax deduction to reduce your taxes. Or, if like many taxpayers these days, you are unable to itemize your deductions each and every year, you might use a DAF to “bunch” your contributions and other income tax deductions into those years when you itemize and then make contributions from your DAF over the years when you do not itemize.
Can I support St. Mark's with my DAF?
Absolutely! Just recommend a grant from your donor-advised fund to St. Mark's School. Although you won’t get a tax receipt – remember, you already got a deduction when you made your contribution to your DAF – we will recognize you for your contribution and make certain that it is used for our important work. In addition, check with you plan sponsor about the possibility of naming St. Mark's to receive the balance in your DAF at the end of your lifetime.