This should not replace the advice of a professional.
If you’re over 60, chances are you’ve given some thought to your legacy—whether that means supporting causes you care about, helping family, or planning wisely for retirement. One tool that’s become increasingly popular for charitable giving is a donor-advised fund, or DAF.
So, what exactly is a DAF, and why should you consider one?
What Is a Donor-Advised Fund?
A donor-advised fund (DAF) is like a charitable investment account. You put money (or sometimes stocks or other assets) into the fund, get an immediate tax deduction, and then recommend grants from that fund to charities over time.
Think of it as a giving “holding tank”—you put money in when it makes sense for you, but you don’t have to decide right away which charities get it.
Why People Over 60 Find DAFs Useful
1. Tax Advantages
When you contribute to a DAF, you can deduct that contribution from your taxes in the year you make it—even if you don’t give the money to a charity until later. For retirees managing income from Social Security, pensions, or required minimum distributions (RMDs), that flexibility can be valuable.
2. Simplicity
Instead of keeping track of multiple receipts from different nonprofits, you make one contribution to the DAF. The fund handles the recordkeeping and sends donations to charities on your behalf.
3. Flexibility in Timing
Maybe you sell a property, receive a large bonus, or take a distribution from retirement accounts one year. You can put a chunk into a DAF then, and decide over months—or years—how to give it away.
4. Family Involvement
Many people over 60 use DAFs as a way to involve children and grandchildren in giving decisions. It becomes a family tradition of supporting causes together, passing down values along with dollars.
5. Supporting Causes Long-Term
Because DAFs can grow tax-free while invested, you may end up with more money to give over time. Some families treat them almost like a mini foundation, directing support year after year.
Things to Keep in Mind
- Once you contribute, the money is for charity only. You can’t pull it back out for personal use.
- There may be fees. Different sponsors (like Fidelity, Schwab, or community foundations) charge different administrative fees.
- You don’t control everything. You can recommend where the money goes, but the sponsoring organization makes the final approval (though in practice, they almost always honor your wishes if the charity is qualified).
Is a DAF Right for You?
A DAF can be a smart choice if you:
- Want to simplify your giving in retirement.
- Have a high-income year and want a tax deduction now.
- Care about involving your family in philanthropy.
- Like the idea of growing charitable dollars for future giving.
Final Thoughts
For people over 60, a donor-advised fund can be more than just a tax strategy—it can be a way to leave a lasting mark, simplify charitable giving, and connect your family around shared values. If you’re considering one, talk with a financial advisor or your favorite charity about how it could fit into your giving plans.
