What are these “Donor Advised Funds” I keep hearing about?

By Kurtis Krug, Philanthropic Advisor, Freedom 55, and President of CAGP Saskatchewan South

Donor Advised Funds are a newer and popular option for Canadians to donate to Charities, and are a “Win/Win” situation for the Charity and Donor.

Using a Donor Advised Fund (DAF) is a way for you to enjoy the experience and legacy of a Charitable Foundation without the cost and complexity that sometimes comes with it. A DAF can be set up very quickly and easily and you can begin making donations immediately or over a long period of time, whatever you wish to do.

Setting up a DAF is easy. To establish your program, you provide it with an initial donation of cash and/or publicly traded securities (mutual funds, stocks, etc.). You will immediately receive a charitable tax receipt equal to the value of your donation. For example, if you decide to donate a qualified mutual fund or stock, you will receive a tax receipt for the full market (current) value of that investment, and you will not have to pay tax on any of the capital gains that have accrued on it over time – double bonus savings for you! Next step, you can name your DAF account – for instance, the “Jane and John Doe Family Fund”.

Each year, you can advise your program administrator of the Charity(s) and amount(s) your DAF will donate to. You may wish to use up your funds quickly or over a long period of time – it’s up to you. Meanwhile the money inside your DAF continues to be invested for growth while waiting to be donated. You can add more money to your DAF at any time (and receive a charitable tax receipt for that additional donation). Since you may choose your DAF to be a long-term program, you can name successors (for example, your children), who would make decisions after you pass away or if you become incapacitated.

There are many options out there for companies that can establish a DAF for you. These options are not all the same. You should enlist the help of a financial advisor to help you select the company that has the best DAF options for you, in terms of minimum investment amounts, administration fees, etc. If you are unsure of next steps, I would be happy to answer any DAF questions you have.

Email Kurtis at Kurtis.Krug@freedom55financial.com