Why choose a Donor Advisor Fund (DAF) or a Charitable Remainder Unitrust (CRT) over a public or private foundation?
- A DAF or CRT is easy and inexpensive to establish. A private foundation requires a donor to create a new entity, apply for tax-exempt status, pay filing fees and incur legal and accounting expenses.
- Yearly DAF administration and management fees are generally lower than fees charged by a private foundation.
- DAFs are more flexible in investment choices and beneficiaries.
- DAFs have no legal payout requirement or excise taxes; whereas, a private foundation is required to distribute 5% of their assets annually and must pay 1-2% of the net investment income in excise taxes.
- With a DAF, the names of individual donors can be kept anonymous and confidential; whereas, private foundations must file detailed and public tax returns including investment fees, trustee names, and staff salaries.
Why is it better to use a DAF than to make the donations yourself?
- You can avoid capital gains taxes by giving the securities to a DAF and allowing Stablish Foundation to sell them to make a donation. If you sell the securities yourself, you will have to pay capital gains taxes, thereby leaving you less funds to donate to the charities of your choice.
- Using a DAF allows you to take the tax deduction in the year it’s most beneficial to you and to delay the gift to a charity until a later time. This may allow the capital to grow and gives you time to make your donation more specific and in line with your philanthropic passions.
- Donating securities to multiple charities through a DAF significantly decreases the paperwork involved.