Donor Advised Fund Deadlines
What are Donor Advised Funds (DAF)?
Over the past several decades, Donor Advised Funds (DAF) have grown in popularity as a tool for capturing the tax benefits associated with charitable giving. An estimated 22% of all giving in 2021 was to Donor Advised Funds. That same year, individual DAFs increased by 28% to over 1.28 million accounts.
With a DAF, your family can set your vision for the future using flexible tools to support your favorite nonprofits and build a legacy of generosity. But funds in a DAF only have the potential to help those in need around the world when you release those funds.
Donor-Advised Fund Limits
Whether you currently have a DAF or are looking to set one up, there are some things to keep in mind. When utilizing a DAF for your charitable endeavors, it is important to work within the structures governing these types of funds:
- Gifts to a DAF are irrevocable and can have no personal benefit to the donor. While the donor does have the ability to direct the funds in a DAF, these funds cannot be contributed in a manner where personal benefit is achieved.
- Assets within a DAF cannot be granted to private foundations. This limitation is connected to preventing personal benefit from the DAF grants.
- Grants from a DAF cannot be made to political parties or individual candidates.
- Donors who contribute to a DAF will receive a tax-deductible donation receipt related to the donation. However, grants made out of a Donor Advised Fund are not tax deductible for the account holder.
- Some individuals consider DAF's as personal assets with their estates. However, once funds and/or assets are contributed to a DAF, these assets no longer belong to the donor and, therefore, are not assets of their estate.
When working through a Donor Advised Fund, you should take into consideration end-of-year deadlines to make contributions to and specify grants out of your DAF:
- Cash donations, such as checks, ACH, and bank wires, must be received by the Donor Advised Fund sponsoring organization by December 30 of the year donated to be accredited within that year.
- Physical checks mailed in must be postmarked by the last working day of the same year to be credited to the donor. The last working day is considered the last day the post office is open in the given year.
- Public traded securities must have their ownership transferred to the DAF sponsor by December 29 to receive credit for the donation within that year. It is recommended to start this process before December 1 of the year to make sure it can be completed.
- If you are interested in having a grant processed out of your Donor Advised Fund by the end of a calendar year, it is recommended to do so at least 3 weeks before the end of the year.
Note: DAF grants processed after the beginning of the new year will not affect the donor's charitable donation tax deduction.
- Depending on the method of setting up a Donor Advised Fund (ie, cash, check, stocks), a donor can set up a DAF as late as December 28 and still receive a tax-deductible contribution for the transaction.
With all DAF deadlines and limitations listed above, please note that each sponsor organization has special considerations in how they manage Donor Advised Fund accounts. We recommend speaking directly with these organizations for specifics on their DAF accounts.
Mite welcomes DAF contributions and can advise on how we can maximize your impact across both local and global charitable projects. Talk to us today.