Financial Planning Fridays #162: Donor-Advised Funds
With the end of the year approaching, this video explains how donor-advised funds, or DAFs, can make charitable giving simpler and more effective. Contributions of cash, stock, or private assets receive an immediate tax deduction, grow tax-free while invested, and can be granted to favorite charities immediately or over time, all summarized on one annual statement.
With the end of the year approaching, this video explains how donor-advised funds, or DAFs, can make charitable giving simpler and more effective. Contributions of cash, stock, or private assets receive an immediate tax deduction, grow tax-free while invested, and can be granted to favorite charities immediately or over time, all summarized on one annual statement.
Key takeaways
- Contributions of cash, stock, or private assets to a donor-advised fund provide an immediate tax deduction in the year they're made.
- Assets inside a donor-advised fund can be invested and grow tax-free before being granted to charity.
- Grants from a donor-advised fund can be paid out immediately, over time, or in future years, and one annual statement replaces the need to save individual donation receipts.
- A donor-advised fund can be especially useful for batching multiple years of giving or for a year with unusually high income.
Hi friends. Today I want to talk with you again about donor-advised funds. With the end of this year rapidly approaching, now is the time to think about your charitable giving and the impact it may have on your 2025 tax return. Donor-advised funds, or DAFs, can help make your charitable giving easier and more effective.
Here's how they work. You contribute cash, stocks, or private assets to your own donor-advised fund. At Presilium, our clients use Fidelity Charitable, the largest sponsor by assets and total grants made. You receive an immediate tax deduction for the assets you transfer into your DAF.
You can then invest the funds within your DAF like you would your other investment accounts. They grow tax-free, and then you pay out grants to your favorite 501(c)(3) charities at any point. They can be paid out immediately, over time, or in future years. At the end of each year, you will receive one statement that shows your contributions and grants made. You will no longer need to collect and save receipts from your charitable donations.
A DAF works best if you want to batch together multiple years' worth of charitable contributions, have an exceptionally high-income year, or want the deduction this year but are not yet ready to give the funds to charity. My family and many of our clients use donor-advised funds for their charitable giving. Please reach out to us to discuss their many benefits for you and for the charities you care most about. Thank you and I look forward to talking with you next Friday morning.
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