Community Foundation Sonoma County sat down with Vice President, Philanthropic Planning J Mullineaux to discuss donor advised funds.

What is a Donor Advised Fund?

A donor advised fund (DAF) is a philanthropic vehicle established at a public charity such as the Community Foundation. It allows donors to make a charitable contribution, receive an immediate tax benefit and then recommend grants from the fund over time. It’s like setting up a charitable checking and/or savings account.

What does it take to set up a DAF?

Not very much. DAF’s are a very simple, effective and cost efficient way to organize your giving over time. Each DAF at the Community Foundation has a fund agreement that is roughly 5 pages in length that can be completed very quickly. There is no minimum donation amount to open a fund, although we recommend a donation of at least $10,000 to make it more cost effective.

How long does it take to set a fund up?

In some cases funds have been set up in one day. The fund agreement is very straight forward. The biggest decisions the donor needs to make is what to name the fund, what will the initial donation be, who will be the fund representative and will there be any successor advisors (typically children). Once in a while at year-end the donor will make the donation first, to secure their tax deduction, while the paperwork is still being finalized. Donors are often contributing appreciated securities at year-end and these donations need to be received by December 31.

Am I required to make grants to nonprofits immediately?

This is the beauty of a donor advised fund – you do not need to make grants immediately. This is very convenient for donors who have extra funds at year-end and need an additional tax deduction, but who do not want to be rushed into granting the funds until they have more time to think about it. Unlike private foundations, there is no required payout amount.

Why are DAFs an important philanthropic tool?

DAFs are important tools for donors who want to get better organized, informed, and strategic in their giving. A Community Foundation is the perfect partner for donors who want to learn more about their local community. Our philanthropic advising staff will work with donors to help them create a giving plan that is aligned with their values and deepest passions. We often introduce donors to nonprofits they previously knew nothing about. We also love to help donors think about how to pass on philanthropic values to their children. In addition, we have many donors who want to be more private about their giving. Unlike a “private” foundation, you can actually be very private in your grantmaking through the Community Foundation. For donors who might like a philanthropic coach, we are happy to help donors discover the various phases of a donor’s development from socially concerned donor, to strategic donor, to donor activist.

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