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Utilizing a donor-advised fund as a charitable giving strategy is a great vehicle for succession planning and can allow for great tax benefits. A donor-advised fund (DAF) is essentially an investment account for charitable giving, set up through and controlled by a public charity that provides simple, flexible and efficient ways to maximize your charitable giving.
With a donor-advised fund, you contribute a lump sum amount to the fund through cash, securities, or other assets. Once funded, you instruct the fund administrator to make donations (grants) to the IRS-qualified public charities of your choice. You receive an income tax deduction for the contribution and assets in the fund grow tax free.
Once your donor-advised fund is established, you can make contributions to the fund whenever you want; as assets grow, you can recommend grants to your preferred charitable organizations.
Donor-advised funds are one of the easiest and most tax-advantageous ways to give to charity for donors at many levels of wealth. A donor-advised fund is a great vehicle to create a legacy because you can name family, friends or other individuals as successor donors who determine what organizations receive grants from the fund.
Since the assets in the donor-advised fund are invested, any funds not granted out each year can grow tax free. Over time, the initial contribution may yield far more in total gifts going to charity than the original amount contributed.
