For business owners, investors, and high-net-worth individuals planning liquidity events or major charitable gifts, Donor Advised Funds (DAFs) provide one of the most tax efficient and flexible philanthropic tools available. A DAF works like a private foundation with less overhead and fewer complex management rules.
What is a Donor Advised Fund?
A DAF is an individually directed account for charitable giving. By opening a DAF account with a sponsoring public charity (e.g., Fidelity Charitable, Schwab Charitable, Vanguard Charitable, etc.) and funding it with cash, appreciated securities, or other assets, the donor receives a deduction of up to 30-60% of Adjusted Gross Income ("AGI") and the ability to "spend" the DAF on any qualified grant or charity of their choosing in the future.
Why Choose a DAF?
DAFs combine powerful tax benefits with simplicity and control. They offer:
- Immediate charitable deduction at fair market value (up to 60% AGI for cash, up to 30% for appreciated assets)
- No capital gains tax on the sale of appreciated securities
- Tax-free growth of assets inside the fund
- No immediate distribution requirement for grant recommendations; DAFs can even be directed by future generations
- Privacy and anonymity for gifts
- No annual mandatory payouts, public disclosure, or excise taxes
- Easily combine deductions or donate pre-sale stock in a liquidity event
How We Can Help You Benefit From a DAF?
DAFs are a powerful tool for tax minimization. Our firm can integrate DAFs into our clients' advanced planning, so tax benefits are layered into their broader estate goals and plans. By planning early with an attorney, our clients unlock greater flexibility and benefits. Ultimately, tools like DAFs allow generous individuals to give on their own terms, creating lasting impact while preserving flexibility for today and tomorrow.
Contact McCullough Law today to explore how a Donor Advised Fund can enhance your tax and charitable strategies.