Broker Check

Demystifying Donor-Advised Funds

February 13, 2024

Philanthropy is an important part of the wealth-management process. At Client 1st Financial, we believe in showing you that there are many ways to be a philanthropist, depending on your strategy. One way to give back is by using a donor-advised fund. 

What is a donor-advised fund? 

A donor-advised fund (DAF) is a philanthropic account that allows donors to contribute to charity, qualify for an immediate tax deduction, and allocate grants over time. Once you put funds into the account, you can donate to any 501(c)(3) charity worldwide. It’s the fastest-growing charitable giving vehicle in the U.S. because of its simplicity, flexibility, and efficiency.

How do DAFs work? 

DAFs are very simple. The owner(s) establish the account at a public charity. Over time, you contribute to the account, and the assets may grow. As the donor, you can give whenever, wherever and however much you like. It is an extremely versatile account that gives you control and freedom over your giving strategy. 

What are the benefits of DAFs?

Beyond control and versatility, DAFs have plenty of other benefits to consider. They are a great way to streamline your tax season. By centralizing all of your charitable giving into one account, you can have just one tax receipt for your donations. You can also donate complex assets by contributing publicly traded securities, mutual funds, or real estate in addition to cash. When you donate appreciated stock or property to your account, you can also avoid capital gains tax. If you’re interested in establishing a DAF, have no fear – they are easy to establish. Client 1st Financial is equipped to guide you through the process of setting up your DAF your way. 

Can my family get involved?

Absolutely. DAFs are a great way to engage your family in your philanthropy efforts and teach children the importance of giving. A fun first task is deciding on a name for your DAF. Many people name their fund using their last names or the cause they plan to support, but this is an opportunity for you to get creative. Additionally, you can name children or grandchildren as Fund Advisors or make them successors to the fund. 

This is just a short overview of what makes donor-advised funds a great option for nearly two million Americans. Our expert team at Client 1st Financial is ready and excited to help you build your DAF. Learn more about our philanthropic planning services or contact us to start today.