Discover the Power of a Donor Advised Fund (DAF)

A donor advised fund (DAF) is a giving account that you can use to organize your philanthropy. DAFs are powerful tools that combine flexibility, tax efficiency, and impact. Managed by a 501(c)(3) tax exempt public charity, called a “sponsoring organization” or “DAF sponsor,” such as CAF America, DAFs allow donors to receive any tax benefits for their gift up front while strategically supporting causes they care about over time.

How Does a DAF Work?

With a DAF, you contribute assets to a public charity and then recommend grants from that balance. Think of it as a dedicated account for supporting the causes you care about – making it simpler to manage donations while maximizing your impact. Here’s a simple breakdown:

1. Give

Open a DAF account and donate assets like cash, stocks, mutual funds, or cryptocurrency. Your contribution is tax-deductible at the time of donation. We handle the complex parts, like verifying information, setting up the DAF agreement, and managing other processes. If you already have a DAF or are giving through a commercial DAF, the process becomes even more seamless. Any DAF can grant to any other DAF with a simple cash gift.

2. Grow

Establishing a Donor Advised Fund (DAF) at CAF America is an efficient, cost-effective alternative to creating a private foundation, offering both domestic and international philanthropy options. Donors can receive an immediate tax benefit while growing their impact over time with an Invested DAF. This option allows donors to recommend investment allocations based on their risk tolerance and growth goals. The assets of the DAF can then grow over time, increasing the ultimate charitable benefit. CAF America handles all complex processes, including tax benefits, investment management, and compliance, while offering low fees for both domestic and international grantmaking. Donors can confidently give knowing their funds are allocated securely and in line with legal regulations, with the option to manage their DAF through an online portal.

3. Grant

Once your fund is established, you can recommend grants to your favorite eligible charities whenever it aligns with your goals. You can also partner with your fund manager to explore similar charitable work around the world, should you want to expand your giving base into other regions/countries. Whether you support causes locally or globally, you control the timing and purpose of your philanthropy. DAF’s can be used to make impactful recurring grants, specific project/goal based impact on the ground, and even anonymous grants.

Benefits of Donor Advised Funds

1. Easy Contribution of Non-Cash Assets

DAFs make it simple to donate non-cash assets, which can often be more tax-advantageous than cash donations. Accepted assets generally include:

• Restricted stock
• Publicly traded securities or mutual fund shares
• Private equity and hedge fund interests
• Privately held C corp and S corp shares
• Cash equivalents (checks, wire transfers, brokerage account cash)
• Cryptocurrencies like Bitcoin
• Real Estate
• Art
• Objects of historic significance

See more about donating non-cash & illiquid assets here.

2. Tax-Free Growth

For donors wishing to grow the impact of their contributions over time, CAF America offers the option of establishing an Invested Donor Advised Fund.

With an Invested DAF, you may recommend investment allocations based on your appetite for risk and goals for growth. Invested DAFs at CAF America enable donors to receive immediate tax benefits while providing the opportunity to grow their giving over time in the interests of contributing even more to their preferred organizations in the future. Importantly, growth in DAF assets does not result in any capital gains taxes at the time of grantmaking. This effectiveness dramatically expands the scale at which you can make an impact.

3. Enhanced Tax Benefits

Cash Donations: By making a gift to CAF America, a U.S. public charity, U.S. donors can receive a tax-receipt for their gift. Along with your donation, you may recommend that CAF America use those funds to support a charitable organization of their choosing. Contributions may also be eligible for an income tax deduction.

Appreciated Assets: Donating long-term appreciated assets, such as securities, cryptocurrency or real estate, can allow you to maximize both your charitable impact and your tax benefit. You can deduct the fair-market value of the asset, up to 30% of your adjusted gross income. You can avoid paying capital gains taxes on the appreciation of the assets while balancing your portfolio.

4. Simplified Recordkeeping

With a DAF, recordkeeping is easy. When it’s time to donate, simply recommend a grant online to any qualified charity. At CAF America, all of the records of your donations and grants can be found in our online portal. Have a DAF with us already? Log in here.

Understanding DAFs

Key Features and Restrictions

Key features include:

• Support Charities Anywhere: Recommend grants to any IRS-qualified public charity, or any non-U.S. grantee pre-approved by CAF America.
• Grant Anonymously: Choose to make grants anonymously or share donor information.
• Specify Grant Purpose: Add special purposes, honor dedications, or other organized effort designations to grants.

However, DAFs come with some restrictions:

• Ineligible Organizations: Grants must be made for a charitable purpose, meaning it can be difficult or impossible to use your DAF to support causes such as political organizations, crowdfunding, or for-profit companies.
  • Give anywhere with CAF America: Thanks to our industry-leading due diligence protocols you can use your CAF America DAF to grant internationally to non-501(c)(3)s leveraging an equivalency determination (ED) or expenditure responsibility (ER) review.
• No Personal Benefit: Funds cannot be used for personal benefit items, like event tickets or tuition, as these do not qualify as charitable purposes.
• No IRA Distributions: Qualified Charitable Distributions (QCDs) from IRAs cannot be directed to DAFs. However, you can still use QCDs to support foreign charities by donating through U.S.-based intermediaries like CAF America. QCDs are only allowed for charities that CAF America has validated or that have a Friends Fund, which is a restricted account for supporting a specific charity. Donations to other charities must be used for restricted grants from CAF America’s Global Charity Database.

Legacy Planning and Strategic Giving

DAFs are also ideal for long-term giving strategies and legacy planning. You can:

Include Your DAF in Estate Plans: Incorporate donor advised funds (DAFs) into your estate plans to reduce estate taxes and support multiple charities with a single gift. Options include making a bequest to the DAF sponsor in your will or naming the DAF as a beneficiary of a retirement plan, life insurance policy, or charitable trust.

Create a Succession Plan: Ensure your philanthropic vision continues by creating a succession plan for your DAF. You can name an heir or other trusted advisor as account managers, so they can designate remaining funds to charities, letting your legacy live on in the next generation.

DAFs vs. Private Foundations

While private foundations provide more administrative control, DAFs are simpler, more cost-effective, and come with fewer compliance requirements. DAFs also focus exclusively on grants to qualified charities, ensuring compliance with IRS regulations. And, since DAFs are typically sponsored by public charities, donors can benefit from increased AGI limits on charitable deductions, allowing you to give more if you are generous enough to max out your donations.

How CAF America Simplifies Giving with DAFs

At CAF America, we make it easy to manage your DAF and maximize your philanthropic impact. As the donor and fund holder, you start by opening a DAF account and making a contribution to fund it. DAFs are especially useful as they allow you to claim tax benefits for donations made up-front while spreading the impact of your charitable giving over multiple years through a thoughtful plan for grantmaking over time.

Whenever you want to support a specific organization, you can submit grant recommendations (advice), and we will work with you to ensure a compliant and effective donation to your chosen charities. While CAF America must make the ultimate decision in regards to making each grant, millions of grants are made from DAFs on the recommendations of their donors each year under our policies and they are a trusted, reliable way to manage a philanthropic strategy over time. We provide you:

• International Reach: Facilitate grants to vetted organizations worldwide.
• Meaningful Philanthropic Strategies: Recommend grants aligned with your goals. CAF America ensures compliance with regulations and proper use of funds.
• Boost the Power of Your Giving: Add designations, recommend grant support to specific projects/goals, or remain anonymous with your grants.

Is a Donor Advised Fund Right for You?

To see if a DAF is the best fit for your giving strategy, speak with one of CAF America’s philanthropic specialists by contacting info@cafamerica.org. With its flexibility, tax advantages, and ease of management, a DAF might just be the simplest, most effective way to amplify your impact on the causes you care about.

At CAF America, we’re here to make your charitable journey smooth and impactful. We collaborate closely with our DAF holders to identify and facilitate grants to organizations worldwide. Join us in making a difference, one thoughtful donation at a time.