What are donor advised funds?
A donor advised fund, commonly referred to as DAF, is an investment account that is operated and maintained by a 501(c) non-profit organization. The non-profit organization that maintains and operates the fund is called the sponsoring organization. Donor advised funds allow the donor to donate cash, assets, or securities to the investment account. DAFs allow you the ability to grow the funds that are going to eventually be donated to charity. Although the sponsoring organization ultimately has control over the account, the donor of the funds may make recommendations on investment strategy and on where to donate the funds. Once funds are transferred to the investment account, the transfer is irrevocable, meaning that you are unable to get the funds back.
What are the benefits of donor advised funds?
Donor advised funds are a great way to make charitable donations. There are various benefits to utilizing donor advised funds. Donor advised funds allow the donor to donate various types of assets, not just cash. The donor may donate stocks, real estate and even cryptocurrency. The donor also does not have to pay any capital gain taxes on the investment.
3 Main Benefits to DAF’s:
- The donor is often entitled to an immediate tax deduction at the time the donation is made, regardless of the donated funds being donated to a charitable organization.
- The donated funds in the investment account can be grown tax free, this is beneficial to charities as they will likely receive more than the initial investment.
- Donor advised tax funds also make tax reporting easier as the donor can just report the fund’s earnings and withdrawals instead of having to report each donation made to each individual charity.
If you are interested in learning more about donor advised funds, please contact EPGD Business
Law for our legal experts to assist you. We have qualified and experienced attorneys who can
answer any questions regarding the formation of your business.
