A donor-advised fund (DAF) functions as your own tax-deductible charitable foundation. It is a way to manage your charitable contributions while you are alive and establish a legacy after your death.

The DAF has legal ownership over the donor's contributions. However, the donor, or the donor's representative, retains rights with respect to the distribution of funds to charities and the investment management of the DAF.

If your itemized deductions, including your charitable deductions, are not greater than the standard deduction, you miss out on your charitable deduction and other deductions for the year.

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The strategy when using a DAF is you don't make a charitable contribution every year. You save charitable assets each year and only make a charitable contribution to your DAF in years you can exceed the standard deduction amount for the year. In these years, you itemize and get deductions above the standard deduction. In the other years, you take the standard deduction while you save to make the next large charitable contribution to your DAF.

Once the assets are in the DAF, you can manage them and their distribution as you see fit or according to the needs of the charity each year.

You will want to research firms that offer DAFs, and determine the reputation of the firm and whether it conforms to IRS standards. Also determine the minimum start-up contribution amounts, the types of contributable assets they allow, and what investment options are provided within the fund.

This strategy is not for everyone, so decide whether the plan is worth the effort and expenses. Ask you financial advisor or tax specialist if this is a practical strategy for you.