A donor-advised fund, or DAF, is an investment account that is used for charitable giving. Donor-advised funds are considered the fastest-growing charitable giving vehicle in the United States. DAFs can be relatively inexpensive to create and maintain, while offering donors the ability to make tax-advantaged charitable gifts.

It is composed of donations made by individuals and administered by a third party. The third party is called the sponsoring organization. A DAF offers an immediate tax benefit and allows you to support your favorite charities immediately and over time.  

A donor makes an irrevocable gift to their donor-advised fund and receives a tax deduction for the year the gift is made. Once the contribution is made, the sponsoring organization has legal control over the funds and the donor can make grant recommendations to the charity of their choice. 

The IRS has specific guidelines around the kinds of organizations that are eligible to receive grants as well as the purposes these grants can serve. For example, grants can only be made to qualified charities and cannot be made to a person, for example. Also, the donor cannot receive more than an incidental benefit, so DAFs cannot be used to cover the admission price for an event or gala. 

The donor-advised fund donor receives tax documentation from the sponsoring organization of the DAF, while a direct donor receives tax documentation from the charity. 

Donor-advised funds can be used alongside private foundations. 

Yes. You will receive tax documentation from the sponsoring organization of your DAF.