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Use a DAF to Maximize Your Charitable Contributions

Use a DAF to Maximize Your Charitable Contributions

September 07, 2022

Use a DAF to Maximize Your Charitable Contributions

If you make regular financial contributions to charitable organizations and want to maximize the funds you already give, donating through a donor-advised fund (DAF) could be an option.

First, let's discuss what a DAF is.

A DAF is a type of investment account that allows you to better support the charitable organizations you already give to. It is a separate fund or account maintained and operated by a 501(c)(3) organization or the sponsoring organization.

Through a DAF, you can contribute cash or other assets, and you may be eligible to take a tax deduction for the charitable contributions you make. Then the funds you gave to the charity can be invested and grow tax-free.

Additionally, a DAF may provide better returns than giving cash directly to a charity. This means that your contributions will go further and your charitable donations continue to serve the organization for longer than if you provided a standard cash donation.

Through a donor-advised fund, your donation is tax-deductible, you can choose who you want to give to and set up recurring donations to make giving to the charity of your choice automatic.

Depending on the donor-advised fund, you can give cash, stocks, mutual funds, bonds and even cryptocurrency. You can donate to a non-profit organization and know that your generosity is helping the organizations you care about and that you're helping make the most of the contributions they receive.

If you're interested in donating to a DAF and would like to learn more, contact the office.

Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisors LLC nor any of its representatives may give legal or tax advice.

This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.

Donor-advised funds are registered 501(c)3 organizations that are funded with cash, securities that have appreciated in value and/or other assets. All of the contributions are put into an account in the donor's name, which is held by a DAF sponsor and eventually donated to a charity of the donor’s choosing. Donors are able to take a current tax deduction for contributions made to the fund; this is an important feature because it allows a donor to take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later. This incentivizes donors who need a tax deduction to make a donation now and then decide where the money will go at a later time when it’s convenient.

Read more: Donor-Advised Funds: The Benefits and Drawbacks | Investopedia