A Donor Advised Fund is a charitable giving vehicle which allows the taxpayer to donate certain assets for an immediate tax deduction while maintaining control of which charities will be allocated the donations in the future.
Donor Advised Funds have gained popularity under the 2017 Tax Act because they allow taxpayers to “lump” their contributions in certain years so they may benefit from a larger charitable contribution in the year it was made. Taxpayers then have the flexibility to choose whichever qualifying charity(s) they want at any point in time. Eligible assets include cash, stock that has appreciated in value and would be subject to capital gains tax if sold, or any investments held for longer than one year.
When deciding if a DAF may be an option for you, it is important to determine how much you’d like to contribute, what assets you can or would like to contribute, the expenses associated with the DAF, and which charities you’d like to support. It is important to also remember that these transfers are irrevocable. Once a contribution is made it cannot be reversed. Therefore, taxpayers should be mindful of their current financial situation before making large contributions.