Donor Advised Funds: A Smart Way to Manage Your Giving

If you’re planning to give to charity before the end of the year but need more time to decide where to ultimately direct those assets or would like to donate to a number of different causes over the course of many years, a donor advised fund (DAF), such as the Morgan Stanley Global Impact Funding Trust (MS GIFT), may be a good option. Administered by a 501(c)(3) public charity, a DAF manages charitable donations on your behalf, while giving you important—and immediate—benefits.

The Features of Donor Advised Funds

DAFs offer several important features. Because DAFs are public charities, you’ll be eligible for a federal charitable income tax deduction¹ when you contribute to the fund, even if:

• You want to delay decisions on where your money is going in order to develop a more thoughtful and impactful giving strategy
• You choose to give to qualifying public charities in installments over time

Let’s say you hold securities that have appreciated significantly. By donating the securities to a DAF, you will not owe the potential capital gains tax on the appreciation and can give yourself time to decide when and where to make your charitable gifts. Between the time you make a donation to a DAF and when you finalize your giving strategy, the donated assets can be invested, with the potential to grow tax-free.

DAFs can also offer you a highly effective way to donate more complex assets, including shares of privately held companies, real estate, art, automobiles or other items that may need to be appraised.

Interested in donating cryptocurrency? You can now contribute gifts of crypto assets (Bitcoin and Ethereum) to your Morgan Stanley GIFT account.

Some DAFs streamline your paperwork and administer grants, providing you with necessary documentation to claim a federal income tax deduction.² You will also receive regular statements listing gifts, grants, fees and investment performance for your records.

Morgan Stanley offers a suite of philanthropic services through MS GIFT. The dedicated team of Morgan Stanley GIFT professionals can work with your Financial Advisor to help manage and administer your DAF. 

Giving Back as a Family

A DAF gives you the flexibility and time to involve family members in your strategic giving, providing you the opportunity to share the causes that are important to you and learn more about those important to your family members. You may name a successor to continue managing your giving plan when you are no longer able to do so. And, if you already have a DAF, you may open a “NextGen DAF” through Morgan Stanley with a lower minimum investment, giving your children and grandchildren the ability to give to their own causes and showing them the importance of giving.

Immediate Financial Benefit, Long-Term Influence

As stated above, DAFs allow you to recommend the amount and timing of grants to qualified charitable organizations, including other tax-exempt public nonprofit organizations and U.S. religious organizations. At an additional cost, Morgan Stanley GIFT donors may also make recommendations to other domestic and foreign establishments that do not qualify as U.S. public charities.

DAF investment options typically include separately managed accounts, mutual funds and exchange-traded funds. If you wish to contribute to MS GIFT’s donor advised fund program, you can choose from several options, including Morgan Stanley’s Select UMA ® program that enables clients to align investment decisions with impact priorities across their portfolio. 

Most DAFs require a minimum initial contribution and minimum grant recommendation. Morgan Stanley GIFT's minimum initial contribution is $25,000 and the minimum grant recommendation is $250. For individuals, the maximum federal income tax deduction when gifting cash to a DAF is 60% of adjusted gross income (AGI), although you may carry forward deductions exceeding AGI limits for up to five years. Families and organizations may also make gifts to the DAF. Note: All donations you make to a DAF are irrevocable.

Is a Donor Advised Fund Right for You?

DAFs are an accessible way to enjoy immediate tax benefits and are among the easiest ways for you to facilitate your charitable giving. They are especially useful in years when you are seeking a charitable deduction, but also desire more time to finalize a giving strategy. By donating to a DAF by Dec. 31st, you could achieve your deduction target.

Consult your Financial Advisor to explore whether a DAF is right for you, as well as to create a structured giving approach that maximizes your impact, while providing more flexibility to realize your legacy.