There’s a lot to consider when making charitable donations. Of course, you want to maximize the positive
impact to the charity, however, it’s also important to make sure you’re proceeding in a way that makes
the most sense for you, your family, and your situation. You may want a vehicle that emphasizes
immediate donor tax breaks, flexibility of donation type and timing, participation in market appreciation,
and the ability to donate to multiple organizations through a single vehicle. If these things are important to
you, it might be time to learn more about Donor-Advised Funds (DAFs).
What is a Donor-Advised Fund (DAF)?
A Donor-Advised Fund (DAF) is an account into which you make irrevocable gifts of stock, cash, or real
assets. You must partner with a non-profit entity to establish the fund. At HighTower, we partner with
account sponsors in order to help our clients establish DAFs. After the account is established and funded,
the donor can suggest an investment strategy to the sponsor and when grants should be distributed to various charities. The fund sponsor then makes the gifts to charity in accordance with the wishes of the donor.
How do I establish a DAF?
We can help you work with our preferred partners to establish your DAF. Once the account is established,
you will need to fund it. Contributions can be made to the DAF at your discretion and can be made in the
form of securities, cash, or real assets. At the time of the gift, the donated amount is considered
irrevocably given to charity. The entire amount of the gift is eligible for a tax deduction for the year in
which you make the DAF contribution. The sponsor will sell assets with no capital gains
consequences to the donor and can reinvest the account with the advice of the donor. When you feel the
time is right, you can direct the sponsor to make grants to the charities of your choosing. You may name a surviving family member(s) to recommend grants for your DAF to continue your legacy of family
philanthropy for future generations.
What are the benefits of the DAF?
When gifting directly to a charity, that organization might be limited in the nature of donations they can
accept. They may only take cash, which limits future appreciation of your gift. Utilizing a DAF allows your
donation to capture market appreciation before it is gifted, enhancing the impact of your donation to an
organization. Additionally, even though money contributed to the fund may not be gifted for several years,
you still get to take advantage of tax breaks for the year in which you make the contribution to the DAF.
This “front loaded giving” may allow you to engage in more effective tax planning compared to
spreading your gifts out over several years. You will retain influence over the
investment by being able to suggest the direction of investments within the fund and retain the ability
to suggest the timing and amounts given to specific charitable organizations.
If establishing a legacy of giving is important to you, we hope you’ll talk with us about whether
establishing a DAF is right for you and your family. Speaking with a trusted financial advisor about your
personal situation and the pros and cons of various gifting strategies is one of the best ways to ensure
you are proceeding in a manner that honors your values. A well-informed investor is our best
client and we hope you’ll give us the opportunity to answer your questions about DAFs and other ways
to participate in mutually beneficial, structured giving.
MAKE A PLAN, MAKE AN INVESTMENT, MAKE A DIFFERENCE. WE CAN HELP.SM
HighTower St. Louis is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.
This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.
All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.
This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.