DONOR-ADVISED FUND (DAF)
Back to GlossaryDefinition
A separately identified fund or account that is maintained and operated by a non-profit organization. Once the donor makes the contribution, the organization has legal control over it.
Summary
A Donor-Advised Fund (DAF) is like a charitable savings account where you can deposit money, receive an immediate tax deduction, and then recommend grants to qualified charities over time. Think of it as a middle ground between writing direct checks to charities and establishing your own private foundation. You contribute assets to the fund, get the tax benefits right away, but then work with the sponsoring organization to direct where the money goes to charitable causes.
Usage Context
Understanding DAFs is crucial when studying charitable giving strategies, tax planning, estate planning, and nonprofit fundraising methods. This concept is particularly important when comparing different philanthropic vehicles and their respective advantages.
Common Confusions
- Thinking they maintain full control over the funds after donation
- Confusing DAFs with private foundations in terms of cost and complexity
- Believing they can recover donated funds for personal use
- Assuming all investment gains belong to them personally
- Misunderstanding the timeline between contribution and charitable distribution
