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Donor Advised Funds DAFs

Donor Advised Funds DAFs

July 05, 2022
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A donor advised fund (DAF) is a way for individuals with high incomes to give charitably, manage their overall tax strategy, and make planned gifts.  You may think:

I’m not a high-income earner!

The truth is—while it is possible to have consistently high earnings that put you in a higher than desired tax bracket, it is also true that many individuals and couples have occasional years where they ‘slip into’ a higher than desired tax bracket because of one-time events:  a bonus at work, a great farming year, excessive gains taxed as ordinary income, etc.   If you are charitable at heart and have a significant tax burden, we should talk about the possible use of a donor advised fund. 

A DAF works like this:

  • You donate money to a DAF that is managed according to your desires, risk tolerance, and objective for the money
  • The entire amount donated can be declared as a tax deduction (up to 50% of your income), reducing your tax burden accordingly
  • The funds you have donated can be sent as “grants” to churches and 501(c)3 charities of your choice, at any time in the future.
  • The ‘relief’ on your tax bill comes in the year you make the contribution to the DAF and you determine when and where you will donate the money.
  • Generally, you would maintain $10K or more in the account.