Donor-advised fund
A donor-advised fund is a separately identified charitable fund owned and controlled by a sponsoring 501(c)(3) public charity. A donor contributes assets and retains advisory privileges, including the ability to recommend future grants. This term explains the fund's structure for owners of businesses, real estate and private investments.
How it works
A sponsoring organization owns and controls the fund, while the donor has advisory privileges or a reasonable expectation of them. The donor may recommend investments or grants, while the sponsor retains control over the assets and final choice of charitable recipients.
Contributed assets are irrevocable and must go to charity. Estate planning practitioners describe established funds as following donor guidance on investments and grants, while noting that the sponsor is not technically required to follow it.
Where it shows up for owners of businesses, real estate and private investments
The sponsoring organization retains ownership and control, including the final choice of charitable recipients.
Points that are easy to confuse
A donor recommendation is advisory. The sponsoring organization owns and controls the fund and makes the final grant decision.
A donor-advised fund is not a charitable account that the donor can reclaim. Practitioners regard contributions as irrevocable and directed to charity.
Common questions
Who controls a donor-advised fund?
The donor has advisory privileges, including the ability to recommend grants, while the sponsor retains the final choice of charitable recipients.
Can a donor take back a contribution to a donor-advised fund?
Practitioners note that contributions are irrevocable and that assets must go to charity. The donor may retain advisory privileges, but does not retain control of the assets or the final choice of charitable recipients.