If you're looking to donate to local or regional organizations with a specific mission (like fighting hunger), you may want to set up a DAF with a community-based foundation that focuses on that goal. Community-based foundations usually know the organizations that best meet your charitable goals and specialize in managing DAFs for that community or mission. You'll pay a modest DAF management fee for as long as there are funds in the account.
An individual nonprofit or institution. You also can establish the DAF directly with the organization you want to benefit, like a nonprofit or educational institution. Setting up a DAF directly with the organization you want to fund typically means your money will be put to use the fastest. But you need to be sure that the organization is qualified to manage your DAF.
For managing your DAF, the organization gets administrative fees, and those fees can vary by organization.9 Those fees benefit the nonprofit, which may use them to make charitable donations. It makes sense to ask not only what the administrative fees are, but where they go and whether they reduce the funds in your DAF.
National foundations and financial institutions. National foundations (like the Donor's Trust) or financial institutions (like an investment firm) allow you to open DAFs with them, too.10 They have more resources and staff to help you manage your DAF, but they come with higher account minimums and management fees. They are also better equipped to help you make grants to national or international causes, though.
Single-issue charities. These are exactly what they sound like, charities that support single issue initiatives or campaigns with the funds in DAFs and other donations. Be careful to ask questions about these charities to ensure they support organizations that thoroughly share your values.
What happens once I add my contributions to a donor advised fund?
When you make a contribution to a DAF, you get an immediate tax deduction — even if your contributions don't all go to a nonprofit directly during that tax year. And the funds invested in a DAF grows tax free.
After you make your first donation, the organization where you opened your DAF gets control over the account. They'll look to you to advise them on where you want to make donations, but they can decline to donate the funds to the organization of your choice.
That's why it's essential to understand the policies of the organization before you choose them to manage your DAF — especially since the donations to you DAF are irrevocable.
Thinking about setting up a DAF? Talk with a Synovus financial advisor to better understand the implications of donations on your finances — and to see if a DAF could be right for you.