A Donor-Advised Fund (“DAF”) is a giving vehicle that allows a donor to make a charitable contribution into a separate fund at the San Diego Seniors Community Foundation, lock-in a tax-deduction in the year given, and then recommend grants from the fund to non-profit organizations of the donor’s choosing.
A gift to a donor-advised fund is a gift to a public charity because a donor-advised fund is, by definition, “owned and controlled” by a public charity. And for federal income tax purposes, this is good news, thanks to the highly favorable deductibility rules that apply to an individual’s lifetime gifts to public charities.
Setting up a DAF is quick and easy, and is an extremely simple, inexpensive, and effective way for you to support your favorite senior-related charitable causes in an efficient manner. You can add to your donor-advised fund whenever you want.
Donors that set up a DAF are given “advisory rights” on grantmaking from their fund. This enables you to direct your giving through one expertly managed and cost-effective vehicle. You choose which non-profit agencies to support, how much to distribute and when.
Reasons you may want to set up a donor-advised fund include:
- Strategic Timing: You may want to obtain a charitable deduction right now but grant the money to a public charity later, such as managing the immediate tax consequences of selling a business.
- Ease of Making a Single Gift: A donor-advised fund gives you the ability to make a large charitable gift to your DAF at SDSCF, receive a tax deduction, and then give away grants to multiple charities over a period of time. An example might be a gift of appreciated stock.
- Multi-Year Grantmaking: You may desire to establish a fund with a substantial gift, and then gradually give away the money in grants over many months or years, such as multi-year funding of a new staff position at a non-profit organization, or timing a large year-end gift for tax planning purposes.
- Ease of Set-Up and Recording: A DAF can be opened in a day. In contrast, a private foundation may wait months for IRS approval, and require hands-on administration, accounting, and record keeping. At SDSCF you need not worry about separate reporting, whereas a private foundation must file Form 990-PF annually with the IRS and also may have state filing requirements.
- Ease of Contributions: Contributing to a DAF is fast and easy. Gifts may be made by cash, credit card donations, and stock donations. Donors may give to a donor-advised fund once or infrequently. For example, receipt of an inheritance or the sale of a business may generate a large amount of cash which can be given to a donor-advised fund with the expectation that those funds will be granted out over an extended period of time.
- Family Legacy Giving: Family philanthropy provides donors a way to teach their children and grandchildren about financial stewardship as it relates to giving back. You can assign multiple “advisors” on your DAF, offering an opportunity to engage your family and children in the joy and privilege of giving and making a difference in the lives of others.
- Donor Recognition: Each donor-advised fund is separately named by the donor and may include your own name (e.g., the Jane Smith Family Fund”). Some donors also like to set up a fund name in memory of a loved one. Grants from your DAF will be acknowledged as coming from your fund, or alternatively a fund can be designated as anonymous.
- Simplicity of Grantmaking: To make a grant from your fund, you merely need to complete a Grant Recommendation form to recommend a grant from the balance available in your fund. SDSCF team members verify the status of the 501c3 organization to ensure it is in good standing with the IRS.
- Effective Grantmaking: Donor-advisors often research nonprofit organizations to discover new opportunities for giving grants, and to ensure their grants are being used effectively. SDSCF team members are knowledgeable and informed about the real issues facing seniors in the San Diego region and the needs of the many institutions that are effectively serving seniors. We are available to assist you with vetting non-profit organizations and to offer grantmaking options that are consistent with your philanthropic passion.
- Favorable Tax Treatment: Because SDSCF is a public charity, donors enjoy the maximum tax deductibility available for charitable donations.
- Fund Continuity: When a fund’s donor-advisor(s) pass away or are no longer able to provide advisory recommendations on a DAF, the balance of the fund may either be converted to a permanent endowment fund, or fully distributed to nonprofit organizations. You make this decision when your donor-advised fund is set up, and by doing so you are assured that the funds you contributed will be used for your intended charitable purpose even after your passing.
Team members at the San Diego Seniors Community Foundation are available to meet with you to discuss your specific situation, the areas of charitable giving you are passionate about, and the benefits of a donor-advised fund. We recommend that you consult with your legal or tax counsel regarding your personal financial and tax planning considerations.
For more information about setting up a Donor-Advised Fund, please contact Bob Kelly at firstname.lastname@example.org.