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Donor advised funds (DAF) have become a popular vehicle for charitable giving due to the favorable tax benefits they can provide and their ability to centralize donors’ philanthropic giving.
Thank you for considering a donation to YWCA Minneapolis. Gifts from a donor advised fund (DAF) have become popular vehicles for charitable giving due to the favorable tax benefits they can provide and to centralize donors’ philanthropic giving. The following is intended to answer some of the most frequently asked questions about donor advised funds, and inform you about important rules and restrictions at YWCA Minneapolis.
A donor advised fund (DAF) is a named charitable giving account you can set up under a public charity, most often a sponsoring financial or community institution such as Schwab Charitable, Fidelity Charitable, Women’s Foundation of Minnesota or Minneapolis Foundation, among others. To set up a DAF, you make an irrevocable gift of cash or other assets to the financial or community institution, receive a tax deduction, and as a “donor-advisor” may make non-binding grant recommendations to benefit the charities you care about.
Giving through your DAF is easy! Simply contact your sponsoring financial or community institution to recommend a grant to the YWCA Minneapolis (or any other charity).
The U.S. Pension Protection Act of 2006 establishes certain restrictions applying to donor advised funds. It’s important to be aware of these to make sure that a donation through a DAF meets your needs and charitable intent. The restrictions that most often impact donors concern pledges (new and existing), providing multi-year support and accepting donor benefits.
Pledges — When a DAF is established, the donor may recommend but not legally direct future charitable grants. As the donor has given up legal ownership of the fund, they are prohibited from making a legally binding pledge from their DAF to the charity they want to support. In addition, donors may not fulfill existing pledges through their DAF. YWCA Minneapolis recommends that donors notify us of their intent to recommend a grant, as it assists us with future planning. Suggested wording is: “I intend to recommend a grant of [amount] from a donor advised fund (DAF), and this notification is not a legally binding commitment.”
Donor Benefits — Donating through a DAF limits the donor benefits you may receive. Because a full tax deduction is received at the time of establishing the DAF, donors may only receive “incidental” benefits, or benefits which do not carry a fair market value. YWCA Minneapolis’ Organizational Advancement team can share which donor benefits you may receive when you donate through a DAF.
Special Event Tickets and Donations — Donors wishing to support YWCA Minneapolis through special events such as The Circle of Women or It’s Time to Talk™ should be aware of the following:
Event tickets and tables, as they have substantial fair market value, may not be purchased through a DAF. An exception to this is when the donor will not attend the event and the entire table or seat is to be donated back to YWCA Minneapolis.
Event donations through your DAF are welcomed. Your event donations, including event raise-a-paddle donations can be made through a DAF. Notify YWCA Minneapolis and contact your fund’s sponsoring organization to clarify any required language to recommend the grant. (Most often recommendations specify that the donor has paid for an event ticket or table out of pocket).
We are happy to recognize your donations to YWCA Minneapolis, whether made via a DAF or other sources, in our Annual Report.
Q: Can I reimburse YWCA Minneapolis for the value of donor benefits or event tickets in order to receive those services?
A: No. Due to IRS restrictions, reimbursing a charity to receive benefits and services (“bifurcation”) is not permitted.
Q: Are there penalties for receiving more-than-incidental benefits for a DAF gift?
A: Yes. The U.S. Pension Protection Act of 2006 imposes an excise tax on any donor, donor-advisor or family member who recommends a grant that results in “more than incidental benefit.” The sponsoring agency (such as The Women’s Foundation of Minnesota or The Minneapolis Foundation) can be penalized as well.
Q: Can a DAF be part of a planned gift?
A: Yes. When establishing a DAF, a qualified charity such as YWCA Minneapolis may be recommended to receive any remaining balance in the DAF upon the death of the donor.
U.S. Pension Protection Act of 2006, Sec. 1231. Excise taxes relating to donor advised funds.
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YWCA Minneapolis Tax ID # 41-0693891