Donor-Advised Fund

A donor-advised fund (DAF) offers an easy way for a donor to make significant charitable gifts over a long period of time. A donor-advised fund is similar to a private foundation but requires less money, time, legal assistance, and administration to establish and maintain. A donor-advised fund also enjoys greater tax advantages than a private foundation.

What is a donor-advised fund?

Technically, a donor-advised fund is an agreement between a donor and a host organization (the fund) that gives the donor the right to advise the fund on how the donor's contributions will be invested and how grants to charities (grantees) will be made.

Contributions may be tax deductible in the year they are paid to the fund, subject to the usual limitations, if they are structured so they aren't considered earmarked for a particular grantee. Though they can bear the donor's name, donor-advised funds are not operated as separate entities like private foundations are, but are merely accounts held by the fund. The fund owns the contributions and has ultimate control over grants.

Here's how it works:

  • You irrevocably transfer cash, securities, real estate, or even restricted stock and closely held business interests into a qualified DAF account.
  • The assets are generally tax deductible at fair market value in the year of the donation.
  • The assets are invested and professionally managed, offering the potential for your contributions to grow until you make disbursements from your account, and each year you can give away whatever amount you please.
  • You may also make additions, potentially tax-deductible, contributions to your DAF at any time.

Schluchter Investment Advisors welcomes the opportunity to help you explore all the considerations that go into the decision to establish a donor-advised fund. Please contact our firm, if you'd like to learn more at (320) 203-6543.