By Dan Brandeis, CEO, Richmond Jewish Foundation

A Donor-Advised Fund (DAF) is a charitable giving account, managed by a public charity (like Richmond Jewish Foundation), that allows you to make a charitable contribution, receive an immediate tax benefit, and then recommend grants to charities that you choose over time.
Starting a DAF is a smart choice for individuals who want to make an impact through their charitable giving while enjoying tax benefits, flexibility for grants and contributions, and administrative ease.
One of the most compelling reasons to start a DAF is the tax advantages it offers. You receive an immediate charitable income tax deduction when you contribute to the fund, even if you distribute the money to charities over time.
If you have investments that have increased significantly in value, a DAF provides an ideal way to donate those assets without paying capital gains tax.
When you sell appreciated assets on your own, you’re typically subject to capital gains taxes, which can reduce the amount available for giving.
However, when you donate these assets to a DAF, you may be able to avoid the capital gains tax and claim a deduction for the full fair market value of the assets.
This maximizes the amount that goes to charity and enhances the tax benefits that you receive. You should also be aware that any growth within a DAF is tax-free.
With a DAF, you can contribute to the fund when it’s most advantageous for your tax situation, such as in a year when you experience higher income or a windfall.
After making the contribution, you don’t have to decide immediately which charities will receive your support. Instead, you can take your time to plan and then make grant recommendations when you are ready. This flexibility makes a DAF ideal for individuals who want to manage their giving over multiple years.
A DAF streamlines the charitable giving process. Rather than keeping track of multiple donations throughout the year, you can contribute to your DAF in one or more lump sums and then direct grants to various charities when it suits you.
This eliminates the need for managing multiple receipts for tax purposes, since you get a single deduction for contributions to the DAF, while the fund administrator handles the grant-making process.
DAFs can support a wide range of causes and charities. Grants can be made to Jewish and non-Jewish charities, including local, national and even international organizations. A DAF allows you to contribute to multiple causes without having to manage separate donations.
A DAF can be used to involve family members in the philanthropic process, making it a great tool for teaching children or other loved ones about charitable giving. You can recommend family members as successors to continue grant-making after you’re gone, or involve them in decision-making now.
This allows you to create a lasting legacy of generosity that can extend across generations.
A DAF offers the option to donate anonymously. This is particularly appealing for donors who prefer to keep their giving private or avoid unsolicited requests for support.
When you make a grant from a DAF, you can choose whether or not to have your name associated with the donation, giving you full control over your level of public visibility.
For individuals who are considering establishing a private foundation, a DAF can be a more cost-effective and less administratively burdensome option. Private foundations require significant legal setup, ongoing management, and strict reporting requirements. In contrast, DAFs are managed by a sponsoring organization, which handles the investment, administration, and compliance. This allows you to focus on your giving without the overhead or the complexity of managing a foundation.
As we approach the end of the calendar year with the financial markets at all-time highs, it may be a particularly good time to consider charitable giving.