What is a Donor Advised Fund?

Picture of a tablet with a charity website to donate money

A donor-advised fund (DAF) is a trust account set up for individuals to deposit assets for charitable donations over time. The trust account is owned by a charitable organization, and individual donors can make contributions to the DAF as often as they’d like. Donors may make an initial contribution ranging anywhere from $0 to $250,000 and can then recommend grants to the fund for charitable organizations whenever they so choose.

What can a Donor Contribute to a DAF?

Donors have the flexibility to decide what asset to donate when making an irrevocable contribution to a DAF, including assets such as:

  • Cash,
  • Stocks, bonds, and mutual fund shares,
  • Money in IRAs and 401(k)s,
  • Private company stock,
  • Cryptocurrencies,
  • Life insurance.

What is a Charitable Organization’s Role in the DAF?

The charitable organization, also known as the sponsoring organization, maintains and operates the trust account. The charitable organization has legal control over all contributions made to the DAF. However, donors retain privilege on how the donated funds are distributed or invested.

The charitable organization must be a 501(c)(3) organization, as classified by the IRS. Private foundations, political groups, crowdfunding campaigns, and other organization that do not qualify as 501(c)(3) organizations are not eligible to receive donor-advised fund grants.

What are Benefits and Drawbacks to Donating to a DAF?

Donors experience multiple benefits when contributing assets to a DAF. First, donors receive an immediate tax deduction the same year a contribution is made to a DAF. The funds donated can then be invested for tax-free growth. Additionally, donors do not pay capital gain taxes on assets given to a DAF, and those assets are not subject to estate taxes. Instead, putting money in a donor-advised fund can reduce the size of a taxable estate. Finally, donors can choose to withhold their identity when donating assets to avoid those donations becoming public knowledge.

On the other hand, there is one main drawback when donating to a DAF. Since the charitable or sponsoring organization has legal control over all contributions made to the DAF, donors lose the freedom to exercise the choice of how the donated funds/assets are used.

EPGD Business Law is located in beautiful Coral Gables. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

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Eric Gros-Dubois

Founding partner Eric Gros-Dubois established EPGD Business Law in 2013. With over a decade of experience expanding the firm and leading it to its current success, Eric now primarily manages the corporate division of EPGD. Given Eric’s educational background, holding both a JD and MBA, combined with his own unique experience of starting a business from scratch and growing it to a multi-million dollar firm, he brings a specialized and invaluable perspective to those seeking legal assistance for themselves and their businesses. Having now instilled his same values in our team of skilled corporate associates, Eric leads a firm that is always ready, willing, and equipped to handle any and every legal matter that a business owner may have.


*The following comments are not intended to be treated as legal advice. The answer to your question is limited to the basic facts presented. Additional details may heavily alter our assessment and change the answer provided. For a more thorough review of your question please contact our office for a consultation.



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