When anything becomes popular and experiences prolific growth questions about its merits or potency seem to follow. As the largest and fastest growing vehicle for philanthropy, Donor Advised Funds (DAFs) have exponentially raised dollars – and questions – over the last year. In light of these conversations we felt it a timely opportunity to share our thoughts on the transformational power of DAFs, locally and nationally.
What are DAFs?
You can think of them as a charitable checkbook. Donors can establish a fund with a public charity (such as a community foundation), and use it to fulfill their philanthropic goals over time. DAFs allow donors to receive a tax deduction up front and then recommend grants when and how they wish. They have become increasingly popular in response to 2017’s Tax Cuts & Jobs Act; which doubled the standard deduction, and accordingly reduced the number of taxpayers who can benefit from charitable deductions
How are they effective for communities and donors?
- Active Investment. Like other community foundations, CFHV is dedicated to seeing philanthropy in action. With monitoring and policies in place to keep funds making grants, we ensure that DAFs are working to achieve their aims – not provide a dormant tax shelter. Last year our 100+ DAFs distributed $1.8 million dollars in grants (primarily in the Hudson Valley). Nationally, they distribute an average of 20% of their assets to charity.
- Powerful Partnership. While DAFs offer donors maximum flexibility, recommended grants are evaluated for transparency and impact. Our staff reviews the legitimacy of recipient charities before any dispersal, and our Board of Trustees oversees all grants made. In addition, our staff researches causes and charities to provide donors with insight on community needs and opportunities for impact.
- Designed for Impact. Fund agreements include guidelines on how to fulfill the donor’s intent after they’re gone. By appointing a successor and/or naming organizations to receive future payments, charitable purpose is guaranteed. Through their administrative fees donors also invest in our ability to strengthen nonprofits through convening, shared expertise and support.
In short, Donor Advised Funds held at the Community Foundations of the Hudson Valley, and at nearly 600 community foundations nationwide, are powerful tools for donors to achieve their goals. In doing so they invest in critical causes locally, nationally and internationally.