What Is a Donor-Advised Fund? A Guide to Charitable Giving

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May 28, 2025

A Donor-Advised Fund (DAF) is a popular and tax-efficient way to give to charity. It allows donors to contribute assets, receive an immediate tax deduction and recommend grants to their favorite charities whenever they choose.

This post will explain how DAFs work, their tax benefits and key things to consider.

What Is a Donor-Advised Fund?

A Donor-Advised Fund is a charitable investment account that allows contributed assets to grow tax-free, which can then be granted to causes you care about. Here’s how it works:

You contribute cash, stocks, or other assets to the fund.
You receive an immediate tax deduction in the year you make the contribution to the DAF.
The assets can grow tax-free.
You recommend grants from the DAF to qualified 501(c)(3) charities at your discretion.

According to the National Philanthropic Trust, DAFs accounted for over 10% of all charitable giving in the U.S. in 2021.

How to Open a Donor-Advised Fund

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To open a DAF:

Choose a fund sponsor (such as Schwab’s DAFgiving360™, Fidelity Charitable, or a community foundation)
Make an irrevocable contribution (cash or non-cash assets)
Receive an immediate tax deduction
Recommend grants to eligible charities at any time

Tax Benefits of a Donor- Advised Fund

Key tax advantages:

Immediate income tax deduction in the year of contribution (if you itemize deductions), up to the IRS limit
Avoidance of capital gains tax on donated appreciated assets
Tax-free growth of donated assets within the fund

Always consult your tax advisor to align your giving strategy with your financial plan.

Things to Consider Before Opening a DAF

Before contributing to a DAF, keep these points in mind:

Contributions are irrevocable (you can’t get the money back)
Grants can only go to qualified U.S. charities
Some sponsors have minimum contribution and account balance requirements
There are currently no mandatory annual grant requirements, so funds may remain in the account indefinitely

Consider your charitable goals and speak with both a financial advisor and the charity you wish to support for best results.

Frequently Asked Questions (FAQs) about Donor-Advised Funds?

What are the tax benefits of a DAF?
Contributions may be deductible, and you can avoid capital gains taxes on appreciated assets.
Can I choose which charities receive funds?
Yes, you can recommend grants to any eligible 501(c)(3) organization.
Are DAF contributions refundable?
No. Contributions are irrevocable.

About the Author

Polly Price

Financial Advisor

Polly Price is a Financial Advisor for Walkner Condon Financial Advisors specializing in long-term financial planning. She formerly worked in the non-profit space, and planning out charitable giving is one area where she has a passion for helping clients. Outside of work, Polly loves to spend time with her daughter and husband exploring all that Madison has to offer, and she is an avid runner that has completed multiple marathons.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.