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| Pathways Advisory Group, Inc Jeff Karst, Associate Planner |
A Donor Advised Fund (DAF) is a complex charitable planning vehicle. Some call it the “poor” man’s Private Foundation. The fund is setup with a qualified DAF company. A donor makes a (potentially) tax-deductible donation to the fund. There is typically a minimum initial donation (the range is $10,000 - $250,000). Although a tax deduction is received in the year the money is donated to the fund, the timetable for distributing funds to charities is flexible. The DAF monies can be invested for the long-term, with periodic liquidations to accommodate distribution requests. While a donor to the DAF can only request a distribution to a specified charity, refusal of a request is quite rare.
Why would someone want to establish a DAF?
- You may want a big tax deduction in a single year due to abnormal income (ie. selling a business).
- You have not decided which charities you would like to donate to but you are comfortable making an irrevocable commitment to charitable causes.
- You want your heirs to be involved. Directing the DAF “grants” can pass to the next generation. They can continue to invest and request distributions for specific charities.
A Donor Advised Fund is a charitable/income tax/estate tax planning tool that could be used in a variety of ways. There is no way to cover all the complexities in this post. If you would like more information or would like to discuss how this might integrate with your financial plan, please let us know.
