Donor-Advised Fund Strategies: How to Maximize Your Tax Benefit & Charitable Impact
Please Note: The information provided here is general and educational in nature. It is not intended to be, nor should it be construed as, legal or tax advice. NPT does not provide legal or tax advice. Furthermore, the content provided here is related to taxation at the federal level only. NPT strongly encourages you to consult with your tax advisor or attorney before making charitable contributions.
Strategies for using a donor-advised fund (DAF) to maximize your tax benefit and charitable impact:
Donate Now. Grant Later.
DAFs are like a charitable savings account. Donors can make contributions to their fund, receive an immediate tax deduction and make grants to their favorite charities over time. Some donors make grants immediately after starting a DAF while others take time to tailor a charitable giving strategy.
Grow Your Charitable Dollars Tax-Free
The charitable dollars in your DAF can be invested. DAF assets grow tax-free because they belong to the charity. With market growth, your DAF balance can also grow, meaning there is more money available for grantmaking.
Contribute Appreciated Assets to Reduce or Eliminate Capital Gains.
Donating publicly traded securities are one of the most common ways of funding a DAF. Securities that have been held for more than one year can be donated at their fair-market value, which means there are no capital gains tax.
Create Regular, Multi-Year Commitments to Your Favorite Charities.
Donors can use their DAF to support their favorite charities—once or for years to come. DAFs allow donors to use specialized grant agreements, recurring grants and anonymous grants to help reach their charitable giving goals.
Establish Your Giving Legacy.
Donors can create a charitable giving legacy by appointing successors or charitable beneficiaries to manage the DAF and recommend grants after the donor’s lifetime.