What Is a Donor-Advised Fund?
A Donor-Advised Fund is a charitable giving account that allows you to contribute assets today, receive an immediate tax deduction, and recommend grants to qualified charities over time. You can think of it as a personal foundation without the administrative burden.
Key Features and Benefits
• Immediate Tax Deduction in Year 1
You receive a full charitable tax deduction in the year of the contribution—even if you distribute funds to charities over several future years.
• Ideal for Donating Appreciated Assets
Donating highly appreciated securities (like publicly traded stock) allows you to avoid capital gains tax, potentially increasing the size of your charitable gift.
• Flexible Contribution Options
You can contribute:
• Cash
• Public or private company stock
• Restricted stock
• Tangible personal property
• Real estate
• AGI Limits & 5-Year Carry Forward
While deductions are subject to Adjusted Gross Income (AGI) limits (up to 60% for cash, 30% for assets like stock), any unused deduction can be carried forward for up to five years.
• Tax-Free Growth & Investment Flexibility
Once donated, assets can be liquidated and invested in a broad range of portfolios—stocks, bonds, mutual funds, and ETFs. The investment growth is tax-free, and future grants to qualified charities are also tax-free.
• Grant at Your Leisure
You can make grants to multiple charities of your choice, whenever you’re ready. Whether you
give all at once or spread grants over several years, you stay in control of the timing.
• Create a Family Legacy
You can name your DAF (e.g., Smith Family Charitable Fund) and involve your children or grandchildren in choosing causes—turning your giving into a teachable moment and lasting legacy.
When to Consider a DAF
A Donor-Advised Fund may be the right fit if you:
• Have appreciated investments or a taxable windfall
• Want to maximize deductions in a high-income year
• Wish to support multiple charities over time
• Are interested in a simple alternative to a private foundation
• Want to grow your charitable dollars through investment
• Hope to teach your family about giving and values
Potential Drawbacks:
• Once a donation is made to a DAF, it cannot be returned to the donor.
• DAFs often have administrative fees, which can reduce the overall amount available for grants.
• While donors can recommend grants, the DAF provider ultimately controls the available investment options and processing of grant distributions.
Let’s Talk
If you’re already giving—or want to begin—a Donor-Advised Fund is a flexible, efficient way to make a bigger impact. It aligns giving with financial planning, tax efficiency, and family values. Let’s connect to explore whether this is the right tool for you.
