Giving Guidance for FareStart Donors: Are You Using Your Donor Advised Fund for the Biggest Impact?
What is a DAF?
A Donor Advised Fund (DAF) is a charitable investment account created with the purpose of supporting charitable organizations you care about. Many philanthropically-minded people have DAFs through large nationals sponsors such as Fidelity, Vanguard and Schwab, or at local community foundation DAFs, such as the Seattle Foundation. A donor opening a DAF makes an irrevocable charitable contribution, receives an immediate tax deduction, and can then recommend gifts at any time to non-profits. No goods or services in return for the gifts are allowed per the IRS.
Funds in a DAF can never be returned to the original donor. There is no payout requirement for DAFs currently, which means money can sit there indefinitely… or it can be put to use any time for the good of the community.
Things You Might Not Know About Your DAF
There has been a major explosion in the growth of Donor Advised Funds recently. Fewer people are itemizing charitable gifts on their tax returns these days, but many still want to remain charitably minded and give with impact, and DAFs are a popular way to accomplish that end.
DAFs vary in size, ($5,000 is the usual minimum) but they all have amazing potential. You or someone close to you may have one. Estimates are that over $160 billion sits in DAFs in our nation, unused. (That’s eight times NASA’s annual budget!) And contributions to DAFs regularly exceed their annual payouts.
This is a vast reservoir of untapped resources for causes we care about! What’s the best way to use it for the greater good, and to fulfill donors’ personal goals for making a difference?
Read to learn about the best ways to maximize your giving impact and legacy to our community through your DAF.
1. Give away more. The funds in your DAF are no longer yours, they are designated for philanthropy, and they do little good sitting there (unless you’re the financial organization earning fees from them). They might grow over time with investment, but they might not. You can activate them now for communities and causes you support who are in need. And there’s so much need.
2. Set up recurring gifts from your DAF, instead of one-time gifts, to make it easy for you and to help non-profits stay stable and do their work in their areas of expertise. It’s easy to do or easy to cancel if you change your mind in the future. Also, see if your employer will match your gifts from your DAF – to double the impact.
3. Consider giving complex assets. Your DAF is a great place to donate complex assets like a vehicle, property or cryptocurrency. They take care of all the messy details of the donation and the funds can then be granted to organizations that might not otherwise be able to handle such a gift.
4. Make a DAF succession plan. What happens if you don’t use up all your DAF funds in your lifetime? If you do nothing, the funds then belong to Fidelity, Vanguard or whoever is the sponsor to give away to any organization they please. Instead, you can put a plan in place to make sure those funds go to the causes you support, or you can appoint a successor to make those decisions. Don’t forget to do this!
5. Stay engaged with your favorite organizations. Many DAF gifts end up looking anonymous on the receiving end, whether or not you actually wanted to be anonymous. And you may not hear anything back, since you don’t get a tax receipt for a DAF gift. Be sure to let the non-profit know how you want your gift to be used, and if you can be contacted by them for updates that explain your giving’s impact. Because they might not even know that gift was from you, and you know they will want to at least thank you.
6. Check out #HalfMyDAF. Started during the pandemic, this is a great initiative to help move funds out of DAFs and into the community where they will make a difference. You make a pledge to spend half your DAF by a certain date (ex. September 30 this year), and the grants you make will be eligible for #HalfMyDAF matches to your grantees – they have $2 million to give away this year! You can nominate FareStart to be eligible for up to $50,000 in matching, too.
7. Heed DAF rules – but have fun and make a difference! A reminder that per the IRS, you cannot buy anything with your DAF (like tickets to an event, raffle or auction items). But you can make straight donations through events (such as FareStart’s Gala Auction “Fund-a-Need”). And you can definitely spend some time finding the causes and programs that get you excited about the good that we can all do together to advance equity, break the cycles of poverty, help vulnerable people, expand education, preserve the environment – whatever are your favorite ways to make the world a better place.
8. Spread the word about this hugely impactful way of giving. You may know people who have DAFs, even if you don’t. FareStart can help you learn more about DAFs, about our work, or about the work of our amazing partners both in the Puget Sound area and across the country – especially those that serve or are led by Black, Indigenous and people of color – we would love to talk with you.
FareStart’s Federal tax ID number is 91-1546757. Click here for more information on ways to give to support FareStart's mission and work, or contact our Development Department at email@example.com or 206-267-6224.