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Giving with a legacy

Giving with a legacy

November 30, 2022

I have been taking some time talking about the uses of money, and the importance of understanding how each use of money affects the other. Again, the uses of money are Earn, Live, Give, Owe taxes, Owe debt, and Grow.

To highlight different ways to give, one favorite mechanism of giving is the Donor-Advised Fund (DAF).  A DAF is a way to give to make a charitable gift today, receive an immediate tax deduction, and release the gifts over time. There may be several reasons a donor does not want to give all of the funds to charities all in one year.

Our office can coordinate Donor-Advised Funds with the different resources in our network. The process takes a little bit of paperwork to set up your DAF, but then the gifting process is fairly easy.  While this is a real gift to charity with no "undo button", a family can choose to give cash, real estate, or investments. Gifting is subject to current-year tax limitations.

Scenario's where a DAF worked:

Making giving a family affair:

A client I work with believes "giving is caught, not taught", so she decided to set up a family-style DAF. Each year, she tasks members of the family to think of a charity they want to give to. At the end of the year, as a family, they set up grants to several charities. This helps teach the heart of giving.

Easier to track receipts:

A client I work with gives to two church ministries and another charity every month. From time to time she will give one-time gifts as well. When it comes to tax time, she needs to go back and track every single receipt to keep up with her taxes. By using a DAF, she can cut one check, 

When the charity can't use the money yet:

A client I work with wanted to give a generous gift so a charity could expand and build another building. The building project would not start for a few years and would take several years to complete. So the client gave one gift today and can release the fund to the charity over time.

When you want to give now, but haven't decided on the charity:

The gift to a DAF is held with the trust company until you and your family decide to gift it.

When to consider a DAF:

  • If you have a stock that grew, and not using it
  • Have a year of high income, and want to give to charity
  • Annual gifts to charity put you right under the itemized deduction limit. This is the "Lump & Clump" strategy pointed out in a post.
  • Sold a property or business
  • An easier way to set up a than a Family Foundation

The Donor-Advised Fund is just a tool. It's a tool that can be used to give effectively. It's not right for everyone, but there are many cases where it works.

Setting up your DAF is pretty easy, just reach out and we can talk more about getting you started.


Want to think through more if a Donor Advised Fund is best for your giving intentions?

Check out the flowchart we had put together. This helps serve as a decision tree to help guide you if you should make an outright gift, or if you should utilize a Donor Advised Fund.

Our office, through trusted professionals, helps set up DAF's. Please give our office a call and we would be happy to open a discussion to advise on your charitable intent. 

Should I Use A Donor Advised Fund (DAF) When Giving To Public Charities?