Donor Advised Funds: new rules on the horizon?

You’ve probably noticed that Donor Advised Funds (DAFs) have been featured more prominently over the last few weeks in financial and wealth management publications. That’s in part because the Accelerating Charitable Efforts Act was reintroduced in the House of Representatives on February 3, 2022. The legislation contains the same proposed law changes as the bill introduced in the Senate in July 2021, which stalled.  

Portions of the bill are designed to address a concern that Donor Advised Funds, unlike private foundations, do not come with a mandated yearly payout, or required minimum distribution.  

The ACE Act proposes to create four new categories of Donor Advised Funds, each with different tax consequences to the donor.  One such category would be specific to Community Foundations, and we are tracking closely the various conversations surrounding the proposed legislation. 

Donor Advised Funds are excellent charitable planning tools for many situations, including for individuals and families who want to organize a regular stream of giving to community organizations and unlock illiquid assets to do so.  

In the realm of DAF sponsors, Napa Valley Community Foundation is emphatically and intentionally a boutique.  We provide a very high level of service to 75 individuals, families and corporations who choose to conduct their philanthropy through the Foundation because we have a bird’s-eye view of the charitable sector in our region.   

Historically, DAFs at the Foundation have ranged in size from $25,000 to $13 million; and our annual payout rate from DAFs (in the aggregate) has averaged 20% per year for each of the past five years. 

Our bottom line on legislation—we’d like to keep things simple, and we support a 5% RMD for DAFs, which is the same payout threshold for private foundations. 

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