Understanding Donor-Advised Funds

As the president and owner of Charity Planning Services, Rich Kruithoff oversees tax consulting services in over ten states. Under the guidance of Rich Kruithoff, his team helps clients develop charitable tax planning strategies to minimize tax liability. One of the company’s primary services is setting up Donor-Advised Funds (DAFs).

DAFs enable donors to contribute to charities, receive tax deductions, and offer grants from the fund to charities. Asset contribution is the first step in setting up a DAF. The irrevocable asset comes from cash, real estate, art, or stocks. Once the National Philanthropic Trust (NPT) records the transaction, it reflects on the DAF account. NPT can convert any asset into philanthropy funds.

Once the asset is entrusted to NPT, donors qualify for federal and state income tax deductions. The amount of tax deduction depends on the tax type and the duration under ownership.

The DAF account allows personalization. Donors can choose any account name, including friends and family. It’s one way to create a legacy plan during retirement planning. The funds do not remain static — fund managers can invest to increase the value within predetermined sectors. The return on investment remains tax-free and helps increase the gift for more grants.