Donoradvised

Donor-advised funds, or donor-advised funds (DAFs), are a charitable giving vehicle in which a donor makes an irrevocable contribution to a sponsoring organization—typically a public charity such as a community foundation or a national sponsor—and gains the right to advise on future grants. The donor or named successors retain the ability to recommend grants over time, but the sponsor has final authority to approve distributions and to manage the fund’s investments and records.

How it works: The donor contributes cash, securities, or other assets. The contribution generally provides an immediate tax charitable deduction. The sponsoring charity pools and invests the assets. The donor then recommends grants to qualified public charities or other IRS-approved recipients; the sponsor reviews and executes grants in accordance with policy and applicable law. Grants can be made in the donor’s name or anonymously, and many programs allow named successor advisers or family members to participate in decisions.

Tax and regulation: In the United States, contributions to a DAF are typically deductible as gifts to public charities, subject to annual deduction limits. The sponsor retains control over the funds and ensures grants align with charitable purposes. DAFs are not private foundations and are regulated and reported under the sponsor’s governance and applicable nonprofit laws, with grantmaking and investment policies set by the sponsor.

Advantages and criticisms: DAFs offer tax efficiency, simplicity, flexibility, and the ability to involve family members in long-term philanthropy, while reducing donor administrative burdens. Critics point to reduced transparency around grant decisions, potential for funds to sit ungranted, and greater sponsor control over ultimate disbursements. Examples of sponsors include community foundations and national giving platforms.