Making $7.7 billion in grants to charities in 2011, and holding more than $37.4 billion at year-end, donor-advised funds (DAFs) are now a major player in U.S. philanthropy.
A DAF is an investment account administered by a charity or investment organization. A donor opens a DAF by making a contribution, and receives an immediate income tax deduction. The donor no longer controls the funds contributed, but can recommend grants to charities of the donor’s choice.
DAFs provide tax advantages to the donor. For example, an individual who is having an exceptionally big income year can donate to a DAF in that year (and obtain a current charitable deduction), while the disbursement of grants to charities through the DAF can be made over several later years. A DAF can be specially advantageous to a person who holds securities that have appreciated in value; by donating the actual securities to a DAF the person not only can obtain a charitable deduction, he or she can avoid taxes on the capital gains attributable to the securities.
DAFs differ significantly. And donations to DAFs are irrevocable. If you are considering donating to a DAF, you need to compare. We’ve created a checklist to help potential donors compare DAFs.
DAF sponsors can be generally categorized as:
- National charities (contributions received by 43 totaled $4.75 billion in 2011).
- Single-issue charities (contributions received by 236 totaled $2.5 billion).
- Community foundations (contributions received by 373 totaled $2.39 billion).
More than 650 DAF sponsors now operate in the U.S. The ten largest DAF sponsors at the end of 2011 were:
1. Fidelity Charitable Gift Fund
2. Schwab Charitable Fund
3. Vanguard Charitable Endowment Program
4. National Christian Foundation
5. Jewish Communal Fund
6. National Philanthropic Trust
7. Silicon Valley Community Foundation
8. New York Community Trust
9. Chicago Community Trust
10. Jewish Community Federation of San Francisco, the Peninsula, Marin and Sonoma Counties