What you need to know about donor-advised funds (DAFs)
A donor-advised fund, often abbreviated as DAF, is a charitable giving vehicle that empowers you to grow your philanthropy with ease and precision.
When you open a donor-advised fund, you commit (or “contribute”) dollars to charity that can be invested and grow before being granted to public charities and nonprofits. You get an immediate tax deduction for your DAF contribution and can recommend grants to nonprofits at any time. Vanguard Charitable donors often use their DAFs over the course of many years, and many even make plans to use their DAF to continue their giving legacy after their passing.
When you have a DAF account, you can contribute into your account and recommend grants out to charities over time, giving you flexibility in your giving. All the administrative work is handled by a DAF sponsor, such as Vanguard Charitable.
A DAF allows you to enjoy the dual benefits of tax advantages and strategic giving. Here's how it works:
Make a contribution
Start by making a tax-deductible contribution of cash, appreciated securities, or complex assets to open a donor-advised fund account. This initial contribution is the catalyst for your philanthropic journey. You can then make additional contributions when it makes the most sense for you.
Recommend Grants
Once you’ve made a contribution, you can recommend grants to your favorite public charities. Vanguard Charitable offers superior due diligence services to ensure you grant to qualified charities in good standing with the IRS. This gives you assurances that you’ll qualify for the tax deduction you expect to receive for your charitable giving!
Invest and grow
While funds are in your donor-advised fund, they can be invested and potentially grow over time. Growing your philanthropic account allows you to give more to the causes you’re passionate about. Many Vanguard Charitable donors have been surprised by how much more they are able to give thanks to charitable investment growth.
Simplify your giving
With a donor-advised fund, you can consolidate your giving in one place. Say goodbye to the hassle of tracking multiple charitable receipts. Vanguard Charitable provides one consolidated tax receipt for all your contributions.
Your giving legacy
A unique aspect of a DAF is the ability to continue charitable giving beyond your lifetime. Once your account is open and you make your first contribution, you can craft a succession plan to establish a legacy of giving.
How to choose a donor-advised fund provider
Opening a DAF is an increasingly popular approach to charitable giving, and you’ll want to ensure that you’re choosing the right partner to ensure you have the support and resources you need.
When you’re considering opening a donor-advised fund, here are some things you should look for.
1
Reliability
When you’re contributing appreciated assets and recommending large or even complicated grants, you want to be able to depend on a provider you trust. Ensure any provider you partner with has shown they’re trustworthy.
- With over twenty-five years of experience in donor-advised funds and over $18 billion granted to charity since its founding, Vanguard Charitable has the knowledge and expertise to help you achieve your philanthropic goals. We offer personalized resources and trusted support to ensure you’re maximizing your giving potential.
Fees are a part of strategic philanthropy, no matter what giving vehicle you use. But be careful not to open a charitable account only to watch too much of your contribution go toward account fees. When you pay less in fees, you allow more funds to go to charity.
- With the lowest all-in fee in the industry, Vanguard Charitable is a solution that offers a leading donor-advised fund without the high costs that are becoming all too common in the philanthropic industry.
Not all investment lineups are created equal among DAF providers. Before you open an account, ensure you’ll have access to quality investment options that will support your long-term giving goals.
- Vanguard Charitable’s investment options are Vanguard-aligned, low-cost, and high-quality. Our wide range of options can suit your preferences and risk tolerance to help your giving grow over time. By providing a menu of high-quality options, we simplify investing and keep costs down so you can focus on maximizing your charitable giving and its impact on the nonprofits you care about.
How to open and use a donor-advised fund
When you partner with Vanguard Charitable, opening and using a DAF is a straightforward process.
Opening a Vanguard Charitable DAF can take as little as 15 minutes online. After you make your initial contribution, you can continue to grow your DAF balance through charitable investments and by contributing stocks, cash, or other assets. Remember that all of your contributions are immediately tax-deductible.
As your account potentially grows via your preferred investment allocation, you can recommend grants to your favorite charities through our user-friendly portal, knowing that your giving is making a substantial impact.
If you have any questions or need more information, contact us – we're here to help you achieve your charitable goals.