Donor Advised Funds or DAFs are increasingly gaining in popularity for their tax benefits and flexibility in making charitable donations. So, what exactly is a DAF? It’s an investment fund, similar to what you may do to help pay for your child’s education (529 plan) or for your own future income needs (401K, 403B, etc.). In the case of a DAF, you are setting aside funds in an account that can grow tax free for the intent of charitable giving either now or in the future.

Some of the other tax benefits are the ability for an immediate tax deduction in the year you contribute and a reduction in any estate tax as the contribution would not be counted as part of the taxable estate. A DAF allows your investments to grow over time and for you to decide which organizations you would like to contribute to and when. Two of the more popular companies who can set up a DAF for you are: Fidelity Charitable and Charles Schwab now known as DAFgiving360.

So, if you are looking for an easy, cost effective way to maximize your dollars in helping out your favorite non-profits, consider opening a Donor Advised Fund (DAF). I, of course, am not an accountant or financial professional, so please first consult with a tax or financial advisor.