PARSA University: What is a Donor Advised Fund?
Do you scamble to find, itemize and file your deduction receipts each tax season? Would you rather shelter income in a high-income year and make donations to your favorite causes whenever you feel like it? Do you wish you could get "frequent giving points" for donations?
Enter Donor Advised Funds. Simple, flexible and double the pleasure! Initially pioneered by community foundations, donor advised funds allow donors to coordinate all of their charitable activities in one account. Contributions to a DAF are eligible for an immediate fair-market-value tax deduction, and capital gains are avoided if appreciated property, such as marketable securities, are used to fund the DAF. By setting up a DAF at a community foundation, donors belong to a network of philanthropists, capable of garnering broader recognition for even small donations.
Since DAFs are set up under the tax umbrella of a public charity and benefit from equivalent tax deductions, they are a sensible way to create a low-cost, flexible method of giving - as an alternative to direct giving or starting a private foundation.
Just how easy is it to open up a DAF? All you have to do is complete a simple letter of agreement and make an initial minimum gift contribution. You can make additional contributions to your DAF at any time. Once it is established, you and anyone else you have listed as a fund advisor can recommend organizations to which you would like to make a grant. These distributions are made by the foundation, in the name of your DAF, unless you've requested anonimity.
With all the time you'll save, you will be able to volunteer more!