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DAF pros and cons

Here are the advantages and disadvantages of using a DAF:

Immediate tax deduction. Your contribution to the DAF is deductible in the tax year in which the initial contribution is made. You don’t have to wait until the fund makes distributions to the designated recipient.

Convenience. It’s easy to establish and contribute to the fund. All the administrative duties and paperwork are handled for you.

Simplicity. You only have to keep track of a single contribution, as opposed to multiple donations to several charities.

No capital gains tax. If you contribute appreciated property such as securities, there’s no capital gains tax on the appreciation in value. It remains untaxed forever.

No estate tax. Contributions to a DAF aren’t subject to estate tax or the probate process.

Tax-free growth. The amounts contributed to the fund are invested and can grow without any tax erosion.

Security. Using a DAF ensures that money becomes available only to legitimate charities.

Anonymity. If you prefer, distributions can be made to charities anonymously. Alternatively, if you don’t mind the limelight, you can name the fund after your family.

Conversely, despite some misconceptions, contributors to DAFs have effectively no control over how the money is spent once it’s disbursed to charities. Donors can’t benefit personally. For instance, you can’t direct that the money be used to buy tickets to a local fundraiser. In addition, detractors have complained about high administrative fees.

Source: Is a donor-advised fund right for you? | Adler Pollock & Sheehan P.C. – JDSupra

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