Donor Advised Funds 101: Why They Matter and How They Work

Donor advised funds (DAFs) are the fastest-growing giving vehicle, now accounting for more than $121 billion in total charitable assets. DAFs are tax-advantaged investment accounts used for charitable giving.

You can fund a donor advised fund with cash or other assets and qualify for a tax deduction for doing so. Your assets inside the fund continue to grow tax-free until you recommend a grant to Westminster or other qualified non-profits of your choice.

In just four steps, a friend of Westminster can make a meaningful difference for current and future generations of Wildcats through a DAF:

Open your donor advised fund account.
Fund your DAF account and qualify for a tax deduction.
Invest your contributions.
Recommend grants to non-profits you want to support.

DAFs are powerful tools for both donors and organizations; they are a good fit for families who want to formalize their charitable giving. You may want to discuss a DAF with your financial advisor as a starting point to shaping your philanthropic strategy and finding the best way to support Westminster and other causes you care about.

DAF Insights From Fellow Wildcats

Sheffield Hale '78, PP '08

"It's an effective tool for a family teaching the next generation the impact of philanthropy. A parent can set up a DAF and then give the children the responsibility of recommending the distributions. It's a way to show children the power of giving back and the difficult decisions in making sure the funds are going to the highest and best use."

Jonathan '90 and Heather Rodbell, CP '23, '26

"We have used a donor advised fund to manage our philanthropic gifts for a number of years. We have found it to be an efficient, inexpensive vehicle to both manage multi-year gifting commitments and maximize tax benefits (utilizing appreciated securities and individual calendar year goals). Most importantly, once the money has been contributed to the DAF, it allows us to prioritize giving, regardless of short-term circumstances."

Mark '94 and Bianca Bell '94, CP '33, '33

"We have chosen to have a donor advised fund and find it is a great solution for a lot of people, particularly under the new tax laws. You can time your gifts to be as tax advantageous as possible-for example, if you have a big gain in your stock portfolio and think now is a good time to sell, you could donate those shares to the DAF and not pay capital gains. Your money then remains in the market and you can recommend grants to most any 501(c)(3).

Given the large standard deduction under the Tax Cuts and Jobs Act of 2017, people also can choose to use a DAF to bunch their giving-they might give a large amount this year and take an itemized deduction and then next year not give any to the DAF and take the standard deduction, but each year the DAF could give to Westminster or other charitable organizations.

If you have a sense for your charitable contributions over the next five years, you could give about 80% of that to the DAF today. You get the advantage of the deduction today, and the market will hopefully give you sufficient return that you can fund 100% of your goal with 80% of the capital. It's a real win-win."

Additional Resources

If you're interested in learning more about donor advised funds , please enjoy access to these free guides: The Convenience and Simplicity of Donor Advised Funds and Maximize the Impact of Donor Advised Funds

If you already have a DAF and are interested in making a gift to Westminster, please use the Visit Your Fund tool to initiate a philanthropic investment, or contact Lauren Flores at 404-609-6438 or [email protected] to get started.