What is a Donor-Advised Fund (DAF)?

A donor-advised fund, or DAF, is a philanthropic vehicle established at a public charity. It allows donors to make a charitable contribution, receive an immediate tax benefit, and then recommend grants from the fund over time. An easy way to think about a donor-advised fund is like a charitable checking or savings account: a donor contributes to the fund as frequently as they like and then recommends grants to their favorite charity when they are ready.

Using a Donor-Advised Fund

How does a Donor-Advised Fund (DAF) work?

  1. You make an irrevocable contribution of personal assets.
  2. You immediately receive the maximum tax deduction that the IRS allows.
  3. You name your donor-advised fund account, advisors, and any successors or charitable beneficiaries.
  4. Your contribution is placed into a donor-advised fund account where it can be invested and grow tax free.
  5. At any time afterward, you can recommend grants from your account to qualified charities based on your donor intent and philanthropic objectives.

History and Trends

First created in the 1930s, donor-advised funds (DAFs) began to grow in visibility and popularity in the 1990’s. However, they were not formally recognized in the tax code until the Pension Protection Act of 2006. Today DAFs are philanthropy’s fast going vehicles, with grants from donor-advised funds accounting for roughly 10 percent of all charitable giving in the Unites States in 2020.

Between 2016 and 2020, gifts from DAFs to charities rose by 118%, totaling nearly $35 billion in 2020 according to National Philanthropic Trust's 2021 Donor-Advised Fund Report. During the same period, contributions to DAFs increased by 90% totaling nearly $48 billion in 2020. Donors may open a DAF through a variety of sponsoring organizations, including mission-specific DAF organizations, community foundations, and financial institutions.

Donor-advised Funds History and Trends

What are the Advantages of a Donor-Advised Fund (DAF)?

  • Administrative Ease - Donors can open a DAF immediately with no start-up cost. There are no IRS-required distributions, limited recordkeeping rules, and no excise tax on investment income.

  • Acceptance of Complex Assets - In addition to cash and stocks, many DAFs allow the transfer of wealth to accounts via contributions of real estate, appreciated securities, closely held business assets, and other illiquid assets such as art and collectibles.

  • Streamlined Management - The structure and administrative ease of a DAFs provides multiple opportunities to streamline its management. Members of the Bradley Impact Fund donor community rely on the convenience and security of an online, self-service donor portal for 24/7/365 access to their accounts. This Donor Portal allows members to manage contributions, research charitable organizations, recommend grants, view investment pool performance, access and track contribution and grant histories, and more. Hands-on client service support is always available when needed.

  • Privacy - Support interests with a desired level of anonymity and avoid direct solicitations from grantee organizations.

  • Ability to Support a Thoughtful, Strategic Approach to Charitable Giving - With a DAF provider that is aligned with your values, receive support in defining and protecting your donor intent while developing your short- and long-term philanthropic goals. Alignment between you and your provider also offers insight into the philanthropic landscape and opportunities to structure giving for greater impact.

  • Offer Legacy - Building and Planned Giving Opportunities - By appointing successor advisors, DAFs provide a great opportunity to establish a philanthropic legacy for your family. You may also direct distribution of assets to charitable organizations during your lifetime or beyond. Members of the Bradley Impact Fund donor community may also direct a transfer of their account to a Bradley Issue or Partnership Fund at the time of their passing, ensuring the ongoing support of well-vetted conservative organizations aligned with their donor intent.

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