Donor-Advised Fund (DAF)

A donor-advised fund, or DAF, is a charitable account maintained by a sponsoring public charity. A donor makes an irrevocable contribution, after which the sponsor legally controls the assets. The donor or named advisers can recommend investments and grants, but the sponsor retains final authority and must ensure grants follow its policies and applicable law.

In the United States, a qualifying contribution may support an income tax deduction in the year of the gift, subject to valuation, substantiation, adjusted gross income limits, and other federal tax rules. The donor does not receive a second deduction when the DAF later sends a grant. Treatment depends on the asset and the donor's circumstances.

Why it matters for family offices

A DAF separates the timing of a charitable contribution from the timing of grants to operating charities. That can help a family contribute during a liquidity event, then take time to develop a giving strategy. It also places administration, due diligence on recipient charities, and tax filings largely with the sponsor rather than requiring the family to run a private foundation.

The trade-off is control. Contributions cannot be reclaimed, grant recommendations are not binding, and sponsors set rules on investments, succession, minimum activity, and eligible recipients. Fees and service levels vary. Families comparing a DAF with a private foundation consider desired control, staffing, privacy, grant types, family participation, and the intended life of the programme.

How it shows up in practice

Suppose a founder contributes appreciated public shares worth $3 million to a US donor-advised fund before a planned sale. The sponsor accepts and later sells the shares, then invests the proceeds in the account. Provided the contribution and documentation meet applicable requirements, the donor may claim the allowable deduction for the contribution year, while grant recommendations can be made over time.

The family creates a committee to review education and health proposals and recommends $250,000 of grants in the first year. The family office records the DAF as irrevocably committed charitable capital, not as a personal asset that remains available for spending. It retains contribution acknowledgements and sponsor statements, coordinates tax documentation with US advisers, and tracks recommended grants against the family's philanthropic goals.