Donor-Advised Funds: A Powerful, Popular Charitable Giving Tool

By: Elizabeth McGuigan
Published: Aug 2021
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Executive Summary

  • All Americans should have the freedom to use a wide range of charitable vehicles to meet their giving goals.
  • Donor-advised funds (DAFs), personal charitable giving accounts, are popular and effective charitable vehicles that support a wide variety of causes.
  • As donors give to DAFs, the funds are irrevocably committed to charitable grants and donors have the flexibility to direct which 501(c)(3)s receive the funds and when.
  • DAFs offer donors ease of use, privacy and the ability to respond to crises quickly and nimbly.
  • There is no evidence to support new restrictions on DAFs.

Introduction

The Philanthropy Roundtable supports the voluntary nature of philanthropy and believes that it is necessary to protect all pathways to giving. Donor-advised funds, or DAFs, are personal charitable giving accounts that allow donors flexibility, accessibility and tax benefits for their charitable contributions. These accounts are hosted by public charities including community foundations, mission-based organizations and national sponsors. As an increasingly popular pathway to charitable giving, DAFs should be encouraged and supported by lawmakers and regulators.

Once a donor contributes funds into a DAF, he or she no longer has control over the funds and may not withdraw the funds for any purpose. While the donor may recommend grants out of a DAF when and how it suits his or her giving goals, every contribution put into a DAF is irrevocably dedicated to distributions to 501(c)(3) charitable organizations. For that reason, the donor may claim the charitable tax deduction upon contribution to a DAF.

DAFs allow donors to choose when to distribute funds to charities. Part of the benefit of DAFs is that they are flexible enough to allow the kind of countercyclical activity that charities rely on in times of economic downturn. Many sponsoring organizations have policies in place to prevent accounts from remaining dormant for long periods of time.