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What the hell is a donor advised fund and why should I care?

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By TC Waugh · Posted June 7, 2017

If you don’t wear a top hat and a monocle on a regular basis, you probably don’t know what a Donor Advised Fund is. A Donor Advised Fund is a great tool to claim a tax break for your charitable giving. Typically used by high net worth individuals, a DAF is an account that can be pre-funded to be used for charitable giving at a later date. And it’s important to note, there are some pretty cool companies providing Donor Advised Funds for any charitable budget.

So if you know you are going to be giving away money this year, but don’t know to whom, and are afraid you’ll forget to claim your donation when the tax man comes knocking, then you need a Donor Advised Fund.

“OK. So what?” you’re thinking. But what if, your boss walked into the room (wearing his top hat and monocle) and handed you a $100 bill. There is only one catch…you have to give it away to a charity. OK. Sure. You’d rather have that money in your bank account, but that’s not the spirit of this game. You HAVE to give it away. So, you choose your favorite charity (maybe The American Accupuncture for Snakes Foundation), the one that means the most to you for whatever reason, and you hand them the $100 bill. The charity is helped and you feel good, right?

Well guess who else benefits? Your boss. Hell, he was going to give that money away anyway. He does every year. Sometimes his company name is on a banner, or in really good years, it might make it onto a t-shirt (hooray). But do his employees care? The answer is yes, sorta.

What if, instead, you weren’t sure if you wanted to give it away to any charity… wanted to buy some time, and ultimately choose the right charity weeks or months later. What if your boss gave you a Donor Advised Fund and pre-funded it with the money he was already going to give away? Now, instead of having his logo on a vinyl curtain somewhere, he can engage his employees by letting them give away the company’s money to charities that the employees care about.

Whoopee! Boss is happy (tax credit claimed) and the employees are happy (they get to make a difference in their communities)! 

20 years ago, no one knew what a 401K was […], 10 years ago, no one knew what an HSA was […], but in 5 years, everyone in America will know what a Donor Advised Fund is. 

20 years ago, no one knew what a 401K was (wait, you mean I’ll have to create my OWN pension fund?), 10 years ago, no one knew what an HSA was (so, my employer prepays money that I know I will have to spend on health care?), but in 5 years, everyone in America will know what a Donor Advised Fund is.

So, how much does your employer contribute to YOUR Donor Advised Fund? Maybe he can even contribute his top hat and monocle. There’s probably a charity that would love to have them!

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TC Waugh

Author: TC Waugh

TC Waugh is Director of Community Affairs for Encast. And he does sales. He’s a lifelong Austin resident. And seems to know everyone in town. Which is a good thing for a startup. He’s got ideas and connections and energy. Those are just a few of the things we like about TC. He’s also a really good and thoughtful writer and we hope he can keep writing while he sells our Encast technology. But he’s really busy.

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