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Donor-Advised Funds: Are They the Best Way to Give?
Donor-advised funds. Everyone seems to be talking about them as a better way to give to charity. But what are they, exactly? Why have they become so popular and what are the benefits of setting up donor-advised funds for charitable giving?
You may be wondering if there’s any benefit to setting one up if you’re not mega-wealthy and only plan to donate a small percentage of your income or assets to charity.
Or does it make sense to set up a fund now and donate over time? There are some very specific benefits, and some drawbacks, to giving through a donor-advised fund (or DAF), so read on to find answers to your questions.
What Is A Donor Advised Fund?
A DAF is a fund you set up with a sponsoring charitable organization, which is the term for the non-profit that oversees it, in exchange for an immediate tax write-off.
As the name implies, you (the donor) act as an advisor for your fund, indicating where you’d like to give your money over time. When you make a request for part of your money to be donated, it’s termed recommending a grant.
So, you can give a sponsoring organization $25,000 this year, take a tax write-off for the entire $25,000 in 2020, and then decide how you’d like to donate these funds (or…