Photo: African Angels Trust

Donor Advised Funds

What is a Donor Advised Fund?

A Donor Advised Fund (DAF) is a type of account that provides donors with additional control over the timing and disposition of their charitable giving.  For use by individuals, foundations, and corporations, DAF accounts allow donors to realize tax benefits at the time that they open and contribute to an existing account.  Until donors ask that their funds be distributed, DAF accounts may be invested and may grow tax-free.

 

How does a Donor Advised Fund work at the American Fund for Charities?

To open a DAF account, individuals donate funds to the American Fund for Charities (AFC), a 501(c)(3) public charity, at which time they receive a tax benefit to the extent permitted by US law.  Donors may contribute additional funds or request that funds be distributed at any time after a DAF account has been opened.

DAF accounts held by the AFC enable giving to both international and domestic charities.  All charities are evaluated and approved by AFC before funds are distributed.

AFC offers two types of DAF accounts: a short-term DAF and a long-term DAF.  Each of these accounts has a minimum initial deposit and distinct investment allocation profile. Regardless of the size of the account, the minimum grant made from a DAF account is $1,000.

 

Why Choose the AFC for Your DAF account?

DAF accounts at the American Fund for Charities offer several advantages for donors.

    1. Donors may receive an immediate tax benefit regardless of when their gifts will be distributed.
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    2. Opening a DAF account, whether a short-term DAF or long-term DAF, provides donors with access to AFC’s due diligence for grants made to internationally based charities. The evaluation and oversight of grants made to all international charities is rigorous, requiring transparency and accountability. Domestic charities are also reviewed to confirm their tax-exempt status.  As a result of this oversight, donors may be assured that their recommended beneficiaries are legitimate, and their gifts will be used as intended
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    3. DAF accounts intended to be held for more than three years may be invested through Zevin Asset Management, an investment company based in Boston, MA, with a long-standing commitment to socially  responsible investing.  All selected securities must satisfy rigorous environmental, social, and governance (ESG) criteria. With Zevin’s asset management, donors can be confident that their DAF accounts will be prudently invested for growth, stability, and liquidity, while having the additional satisfaction of knowing that their gifts will be productively invested while they await distribution. *

                * All investing involves risk and may result in gains or losses.  AFC cannot guarantee funds will increase in value.

 

All assets held in DAFs are the property of AFC, subject to AFC’s exclusive legal control and can only be used for charitable purposes. DAF assets may not be used for the benefit of the donor or donor advisor, or for any other purpose conferring impermissible private benefit.

 

AFC offers two types of invested DAF accounts:

Short-Term DAF (SDAF):

The SDAF is the preferred option for donors who wish to support an AFC-approved charity in the near term while keeping their account balance and fees low. SDAF accounts are maintained in money market accounts and are typically held for less than three years. The minimum contribution to open an SDAF is $5,000. Because all beneficiary suggestions and grant disbursements require Board approval, it may take up to 60 days for funds to be distributed.

 

Long-Term Invested DAF (LDAF):

Donors who wish to maintain a DAF account for more than three years may prefer a Long-Term Invested DAF account. LDAF’s are ideal for donors who seek an immediate tax benefit while delaying fund distribution. LDAF’s are also appropriate for donors seeking to make large gifts to international and domestic causes but who wish to avoid the administrative burden of establishing a private foundation. The minimum contribution to open an LDAF is $25,000.

LDAF funds are invested in Zevin’s flagship product, its Global Appreciation portfolio, which seeks to produce superior long-term results focusing on capital appreciation through active risk management.  This is a multi-asset, all-cap, portfolio, only appropriate for long-term holdings.

 

Tax Benefits:

As soon as a gift is made to the AFC, donors are eligible for a tax deduction to the full extent permissible by law, just as with gifts to any other US non-profit.

Donations of long-term appreciated securities may help minimize capital gains taxes, enabling maximal charitable support from donated assets.  Please consult your tax advisor to learn how this can best work for you.

 

How to set up a Donor Advised Fund at the American Fund for Charities:

AFC accepts contributions of cash and liquid assets, including all types of publicly traded securities, stocks, bonds, and mutual funds. Gifts may be made by check, wire transfer, ACH (automated clearing house), or credit card.

Application forms to open a DAF account may be found here.  Applications are typically processed within one week.   Donors may suggest beneficiaries at the time they open an account or at any subsequent time.  Disbursements may take up to 60 days after beneficiaries are suggested.

The minimum initial deposit for each type of DAF account is as follows:

Short-Term DAF (SDAF)………………………..$5,000

Long-Term Invested DAF (LDAF)………………$25,000

 

Reporting:

The AFC can provide income and expenditure reporting on grantee activities and project finances if requested.

Donors receive quarterly statements that report on DAF account investments, balances, distributions made, and account performance.

 

Fund Fee Structure:

AFC Annual Administrative Fee………………………………………………0.50%

Investment Management Fee (LDAF only)……………………………….Variable, capped at 0.75%

Fees Retained (charged to each grant made out of the DAF):

International Grants                                     Domestic Grants

4.5% of the first $500,000                              1.5% of the first $500,000

3.0% of the next $500,000                             1.0% of the first $500,000

0.65% for > $1M                                             0.5% of the next $2M

0.1% for > $3M

Photo: Ben Dilley