Even in the face of lingering post-pandemic inflation, philanthropy continues to be important to many Americans. In fact, Morgan Stanley recently reported that 64 percent of all gifts made to U.S. charities in 2023 were made by individuals, not by corporations or foundations.
However, many people tend to be reactionary with their charitable giving, making multiple gifts throughout the year with no real plan in mind. This approach can result in smaller donations that fall short of the impact you hoped to make and, if you itemize on your tax return, can cause confusion at year-end when you need to gather your receipts and acknowledgements.
A donor advised fund (DAF) is a charitable giving tool that can be right for anyone who wants to streamline their giving while maximizing both the tax advantages for themselves and the positive impact for their favorite charities. It’s fairly simple: a donor establishes their DAF with a qualified 501(c)(3) organization (sometimes called a sponsoring organization), makes contributions to the fund and then recommends grants to support qualified charitable organizations, like Drexel University. Since DAFs are professionally administered, you can be assured that your donations are being professionally invested and will grow tax free. (Many DAF administrators offer a range of investment options.)
What are some of the best benefits of DAFs?
- You can make gifts to your DAF as often as you’d like over your lifetime. And you’ll receive an immediate tax deduction for every charitable contribution you make, even though you may choose to wait until future years to recommend that grants be made to your favorite causes.
- You’ll have maximum flexibility with the assets you choose to donate. While many smaller organizations may not be able to accept gifts of appreciated assets (i.e., owned more than one year) such as stock, mutual funds, cryptocurrencies, private business interests, closely held company stock or real estate, most DAF administrators can accept these types of donations regardless of size and complexity. (The ability to accept complex assets to a DAF will vary by the provider.)
- Most DAF administrators provide you with access to monitor your account and make grant recommendations online, if you wish.
- Simplicity! The calendar year-end paperwork involved with documenting charitable donations for tax compliance will be significantly reduced.
- You can choose the name for your DAF account, and many families establish DAFs as a way to involve younger generations in decisions about charitable giving and to build a tradition of philanthropy.
How long will your DAF last? It’s up to you. You can name Drexel as a full or partial beneficiary to receive the funds in the account at your death. Or, if you want to establish a family tradition of philanthropy, you can name someone to take over your role of advising on investments and grants after your death.
DAFs offer the opportunity to make philanthropy as easy, effective and personally meaningful as possible. To learn more about this efficient, tax-smart charitable giving tool, contact David Toll, JD, senior associate vice president in Drexel's Office of Gift Planning, at 215.895.1882 or giftplanning@drexel.edu.