Donor-Advised Fund
With a donor-advised fund (DAF), a donor can make a gift now, receive a current income tax deduction, and retain the flexibility to recommend gifts later when the time is right.
Clients may find that using a DAF provides a simple, meaningful way to benefit the UMass Foundation, for the benefit of UMass Law, and other charities they support. Consider the following:
- A donor establishes a DAF with a single donation and can make additional donations later if they wish. Most DAFs will accept assets beyond cash and securities, sometimes including real estate, cryptocurrency, or closely held stock.
- The donor-advised fund then owns those assets and administers the fund—your client no longer needs to manage the money.
- This arrangement allows the donor to qualify for an immediate charitable income tax deduction for the amount contributed to the DAF, even though the money hasn’t been distributed to charity yet.
- The donor retains advisory privileges, meaning that at some point in the future, they can recommend (but not require) gifts to be distributed to specific charities.
Evaluate the fit.
Donor-advised funds may be a particularly good option for clients who:
- Want to make a large, tax-deductible contribution this year to offset increased income
- Haven’t yet fully established their charitable goals and would like flexibility in making future gifts
- Would find it beneficial to segment their charitable funds from their other assets
- Would like to donate a more complex non-cash asset that the UMass Foundation (or another intended charitable recipient) cannot accept
See how it works.
Five years ago, Steve earned a significant year-end bonus. He knew he wanted to use that money for a charitable purpose, but he wasn’t yet sure where he wanted to have an impact, and he had little time to decide. He chose to donate the full amount to a DAF, which ensured an immediate and much-needed charitable income tax deduction. The DAF invested the assets and retained ultimate authority over any distributions.
This year, Steve’s nephew graduated from UMass and landed a great job. Steve uses his advisory privileges to recommend a grant from the DAF to us to help fund student internship programs going forward. The DAF distributes the recommended gift to the UMass Foundation (they are not obligated to do so, but in most cases, they will follow Steve’s recommendations).
Consider the timing.
If your client wants to qualify for a charitable deduction this year, they should initiate their gift by mid-December.
The UMass Dartmouth Advancement Team can help.
Ask us for more information about donor-advised funds and grants to the UMass Foundation.