What is a Donor-Advised Fund? And how does it work? 

What is a Donor-Advised Fund? And how does it work? 

A DAF is a centralized vehicle for charitable giving that makes it easy for donors to dedicate funds to support their favorite nonprofit organization(s). It also provides an operationally convenient and tax-efficient method for donors to manage their charitable giving.

With a DAF, charitably inclined individuals, families, and businesses make an irrevocable gift to a public charity that sponsors a donor-advised fund program (like the Community Foundation), and they may even take an immediate tax deduction. Donors can then recommend grants over time to IRS-qualified 501(c)(3) public charities. DAFs also allow donors to approach their charitable giving thoughtfully by involving other family members or colleagues in their philanthropic decisions. Many of our donors give donations of long-term appreciated securities, or (if they’re over 70.5) make a Qualified Charitable Distribution from their IRAs, and other assets to fund their DAFs all of which are more “tax-smart” than giving cash. And donors experience tax-free growth on their donation, which could result in more money to support your favorite charitable cause(s)!

Here’s how it works: 

  1. A donor makes an irrevocable, tax-deductible donation to a Named, Donor-Advised Fund at the Community Foundation.
  2. The donation grows through investment and the investment growth is tax-free.
  3. The donor recommends grants from the DAF to qualified public charities of choice, now or at a later date.

It’s just that easy! Give us a call at 765-662-0065 if you’d like to learn more about Donor-Advised Funds and how easy it is to set one up to support your charitable goals.

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