Have you ever leafed through a program or annual report that lists donors and noticed an entry that says "Mary and John Jones Donor Advised Fund"? You may have thought, "What in the world is that?"

A donor advised fund, or DAF, is a philanthropic vehicle that allows donors to make a charitable contribution, receive an immediate tax benefit and then recommend grants from the fund over time. They function a bit like a charitable checkbook. Unlike establishing a private family foundation, set up is easy, does not entail costly legal and management fees, and does not have an annual distribution requirement.

DAFs have become philanthropy's fastest-growing charitable-giving method in recent years. Today, they account for more than 3 percent of all charitable giving in the United States. Individuals, families, and businesses like the conveniences they have to offer.

Deductions include up to 50% of adjusted gross income (AGI) for gifts of cash and up to 30% of AGI for gifts of appreciated securities, mutual funds, real estate and other assets. There are also tax advantages when contributing specific assets, like long-term appreciated securities. By donating appreciated stock held for more than one year to a DAF, donors can avoid or reduce capital gains taxes. (Note: the statements above should not be construed as tax advice. We recommend that you consult your financial professional or attorney before making charitable contributions.)

The simple steps to setting up a DAF with IPCF are:

1. You make an irrevocable contribution of personal assets (cash, appreciated stock, mutual funds, etc.).
2. You immediately receive the maximum tax deduction the IRS allows.
3. You name your fund whatever you like, designate the advisor(s), and tell us how you wish the fund to be handled upon your death (successor advisers, charitable beneficiaries).
4. Your contribution is placed into a donor advised fund account where it can be invested and grow tax free.
5. At any time, you can recommend gifts from your fund to qualified charities.

Once established, IPCF handles the administrative work including printing and mailing checks with a cover letter, managing investments, recordkeeping, tax receipting, and grant administration.  We also provide you with a quarterly report showing all activity in your fund.

Donor control is one of the key differentiators between DAFs and other giving vehicles. When donors make contributions to their DAFs, they are gifting those assets irrevocably to IPCF. Once accepted, IPCF owns them in their entirety.

The term donor advised fund is reflective of this relationship: Donors have only advisory privileges to grant the assets in their DAF; IPCF has the authority to approve or deny those recommendations. However, recommendations are approved in an overwhelming majority of cases. In those cases where they are not approved, the reason is usually the ineligibility of the recipient to whom a gift is recommended.

IRS regulations prohibit distributions from a DAF for the following: 1) grants from which donor, donor's immediate family, advisor or related party derive a personal benefit, 2) pledges, 3) grants to individuals, 4) expense reimbursement, 5) membership dues, and 6) tickets for dinners/events.

If you think a donor advised fund might be a good choice for you, contact us to set up an appointment at (309) 662-4477.