Donor Advised Funds

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Donor advised funds (or DAFs for short) are simple and convenient and have gained popularity in recent years.  Over the past five years, the number of active DAFs has surged, with an increase of almost 200%.

DAFs allow donors the flexibility to recommend nonprofit organizations of their choice to be considered for grants each year.

What is a Donor-Advised Fund?

• Donors put money into an investment fund with a sponsoring organization, and then recommend grants out to a charity at a later point.
• Donor gets an immediate tax benefit, even if the money doesn’t go to charities for years.
• While donors technically recommend grants, sponsoring organizations very rarely go against a donor’s wishes.
• Money is usually invested in this account (mostly in mutual funds) — so the fund grows over time.
• Sponsoring organizations generally make money on “management fees” (possibly twice!).
  • Management fee for overall fund.
  • Fund fee on mutual funds (made by related organization).

What are the Benefits of a Donor-Advised Fund?

• Gifts are tax deductible, and because the fund is housed in a public charity, donors receive the maximum tax deduction available.
• Avoid excise taxes and other restrictions imposed on private foundations.
• Operational efficiencies, including staffing costs, legal costs, or costs to establish the fund.

What can donors “give” to a Donor-Advised Fund?

• Donors can contribute cash, publicly traded securities, stocks, crypto, mutual funds, or non-publicly traded assets.
• Many DAF sponsor require minimum contributions between $5,000-$25,000, but some have $0 minimums, making it easy for anyone to open a DAF.

What are common sponsoring organizations for DAFs?

• Community foundations: Independent organizations created by and for people in a local area.
• National DAFs: Charitable arms of financial custodians like Fidelity and Schwab.
• Single issue organizations: Institutions that create DAF programs to mobilize members around a certain identity, faith, or organization (most common are universities and hospitals).

How can I ensure a lasting legacy in future support for SDPB?

1. Name SDPB as a beneficiary of your fund.
You can do this at the time you create the fund, or if you already have one, contact your fund administrator to complete a change of beneficiary form. We can use the remaining funds to support our mission. You have the option of naming SDPB the beneficiary of the entire account or a percentage of the fund.

2. Create a family legacy of giving.
Name your loved ones as your successor to continue recommending grants to charitable organizations, such as SDPB. This way, the funds can grow to support future family philanthropy. Families can build a tradition of giving and teach their children the values of philanthropy by involving them in the decisions about which grants to recommend.