What’s a Donor-Advised Fund?
A donor-advised fund account is a form of philanthropic giving in which an individual creates a “personal charitable savings account” and deposits their contributions of cash, stock, or other assets without choosing a specific recipient right away.
When the donor decides on a recipient, they can send the money from the DAF account to the nonprofit organization as a grant (all while benefiting from an immediate tax deduction upon creation of the fund!).
Donor-advised funds are created by the donor but are managed by other parties, such as a foundation or another sponsoring organization, who actively invest and manage the funds. A huge portion of these sponsoring organizations are charitable arms of financial-services firms, such as Vanguard and Schwab.
The donor can then continue to deposit assets into the DAF. While the sponsoring organization manages and oversees the fund, the donor advises them on when and where to make gifts.
DAFs have been an attractive choice for charitable giving for a while now because they offer a hefty deduction benefit and a flexible but relatively hands-off approach to giving.