Last updated
Last updated
Donor-advised funds are tax-deductible financial accounts for giving sponsored by a 501(c)(3) public charity. Similar to a foundation, donors may receive upfront tax advantages on charitable funds contributed to these accounts. Then they can decide later which charities to grant to. Funds may also be invested in the account and grow tax-free.
When combined with a private foundation, DAFs can bring new capabilities to manage philanthropy most efficiently. Some example use cases are below:
Meet client foundation distribution requirements. DAF contributions can count toward your client foundation’s distribution requirement.
Maximize income tax efficiency. DAFs have higher Annual Gross Income deduction limits on your client's taxes.
Simplify grantmaking. Leverage built-in DAF grantmaking for small and international client grants.
Have anonymity. Grants from a DAF can be as private or public as desired.
Collaborate with other funders. Your client can combine funds with other grantmakers or invite the public to give alongside them in community DAFs.
Preserve the public support test of nonprofit grantees. A grant from a DAF may be a more favorable way for small charities to receive larger gifts
Give grantmaking rights on specific funds to others, including children or grandchildren. Invite your client to set up a DAF for someone else and that they can grant in their name.
As a trusted stakeholder in your clients' financial journey, you have the power to invite your clients into a more diverse philanthropic life through the Foundation Source DAF giving program.
We recommend leveraging this 3-Pager with clients as collateral to help you introduce them to the Foundation Source DAF giving program:
Though the Foundation Source DAF program has been designed with simplicity in mind, this may be the first time that some of your clients are encountering the concept of donor-advised funds.
Generally speaking, though donor-advised funds are a powerful strategic giving tool, they can be challenging to describe.
A donor-advised fund is a tax-deductible financial account for giving. Some phrases we like to use to help people understand them is:
"It's like a 401k, but for giving"
"It's like a personal foundation, but without all the legal hassle"
Wondering how to talk about DAFs without saying "DAFs"?
We recommend you initially explain the concept of donor-advised funds to your clients so that they understand the legal structure of their donor-advised fund account. However, for some clients, it may be beneficial to refer to their DAF as a "giving account". Throughout this guide, we will use "donor-advised fund" and "giving account" interchangeably.
When approaching your clients with the Foundation Source DAF program, we recommend these to help explain what donor-advised funds are and how they can help clients achieve their ambitions of generosity:
to connect your client's giving situation to the implementation of a donor-advised fund.
that break down complex aspects of donor-advised funds by topic.
with collections of articles that detail best practices around purposeful giving.
that offers a comprehensive explanation of donor-advised funds.
Curious to learn more about the Foundation Source DAF program? Contact for any program or product-related matters.
How to communicate the benefits of DAFs to your clients.