Donor-advised funds (DAFs) can also provide flexibility for those looking to make a long-term charitable impact. DAFs allow you to contribute assets, receive an immediate tax deduction, and distribute funds to charities over time. This strategy may be worth exploring with your trusted financial advisor if you’re looking for a structured approach to giving.
There are many advantages to donating to a Donor Advised Fund here are just a few of them:
- DAFs are sophisticated enough that they can generally accept your complex gifts (i.e. shares of a closely held business). Many of them provide some level of support as well. If you want to make a gift at the end of the year and your charity can’t facilitate that gift, donate it to a donor-advised fund, which can sell the asset and give cash to the charity.
- Sometimes charities aren’t equipped to handle a massive donation. A donor-advised fund can help you receive a large deduction and help the organization use it over time.
- Funds in your DAF can be invested, and there are several great ways to invest in high-impact business ventures around the globe. These tend to be higher risk and are usually only available to qualified purchasers and/or accredited investors. Some of these investments fund important work like creating infrastructure in developing nations or creating technology to combat human trafficking.
- When you donate to a DAF, you may be able to invest in high-impact initiatives and donate the profits to fund other charitable work. If these impact investments lose money, those losses occur with funds you’ve already given away.
