Donor-Advised Funds and Impact Investing A Practitioner's View

A donor-advised fund is a charitable account whereby donors make irrevocable, tax-deductible contributions to a charitable sponsor. Donations to DAFs are not only tax-deductible at the moment they are made, but they also grow tax-free. Donors give up legal control of these donated assets to the DAF sponsor, but donors retain advisory privileges that allow them to recommend how those funds are distributed to the nonprofits of their choosing. Donors can also recommend how funds in the account are invested. Although the ultimate decision-making authority regarding grantmaking and investments resides with the DAF sponsor, as a practical matter, most DAF sponsors defer to the recommendations of their donors as long as they are recommending activities that are permissible by law and regulation. © 2022 Dorothy A. Johnson Center for Philanthropy at Grand Valley State University. The Foundation Review is reproduced electronically by ScholarWorks@GVSU. https://scholarworks.gvsu.edu/tfr