MCF - What Is A Donor-Advised Fund

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What Is A Donor-Advised Fund?

Donor-advised funds are one of the many types of funds that a donor can establish at a community/public foundation. A fund held by a community foundation or other public charity, where the donor, or a committee appointed by the donor, may recommend eligible charitable recipients for grants from the fund. The public charity's governing body must be free to accept or reject the recommendations.

New Definition of Donor-Advised Fund
The new charity law, Pension Protection Act of 2006 (H.R. 4), defines a donor-advised fund as a fund that possesses all three of the following characteristics:

It is separately identified with reference to the contribution of a donor or donors (for example, the fund is named after a donor or persons related to the donor, or the organization's books track contributions to the fund with respect to the specific donor(s)).
It is owned and controlled by a sponsoring organization.
The donor or a person appointed by the donor has, or must reasonably expect to have, the privilege of providing advice with respect to the fund’s investments or distributions.

Donor-advised funds allow a donor to be actively involved with the foundation in recommending how the fund's grants are distributed. "The donor-advised fund area has just been booming as the vehicle of choice for many donors," says Jane Ransom, president of the Women's Foundation of Minnesota, a community/public foundation dedicated to meeting the needs of women and girls in Minnesota.

• More information at the Minnesota Toolkit for Giving