Donor-advised funds (DAFs) are a type of philanthropic account that allows donors to make charitable contributions and receive an immediate tax deduction. Donors can then recommend how the funds should be spent over time. DAFs offer many advantages for donors, including flexibility, tax benefits, and simplification of the giving process.
DAFs also have several potential benefits for the charities that receive contributions from them. First, DAFs provide an ongoing source of funding for charities. Donors who establish DAFs often make additional contributions to their fund over time, which can provide a reliable stream of revenue for charities. Second, DAFs offer donors the opportunity to involve their family members in their philanthropy. Donors can recommend that their DAF be used to support specific causes or charities that are important to them and their family members. This can help to create a new generation of donors who are committed to supporting the same causes as their predecessors.
Finally, DAFs can help reduce the costs associated with fundraising. Charities incur significant costs when soliciting donations from individual donors. By contrast, solicitations to DAFs are typically made by the fund's sponsoring organization, which incurs only minimal costs.