The Joseph Group

Charitable Giving Made Simple with a Donor Advised Fund

November 12, 2021

To Inform: 

Some things are hard – like open heart surgery, learning a new language, and negotiating with a hungry toddler. Charitable giving shouldn’t be hard, and a donor advised fund (DAF) can make it even easier.

The saying “cash is king” doesn’t hold true for charitable giving. You can make a bigger impact – with a smaller tax burden – by giving appreciated securities. For those who haven’t done it before, this may sound cumbersome, but it’s not. Using a donor advised fund (DAF) both maximizes your tax benefit and minimizes the stress of documenting it, all while supporting the charities you care about.

How does a DAF work?

Simply put, a DAF is a charitable account into which you can donate many different kinds of assets (cash, securities, real estate, business ownership interests, etc.). Any gift that goes into the DAF is tax-deductible in the year of the donation. However, funds can remain in the DAF for many years and continue to grow until a future distribution date. This feature is key, since it allows you to separate the tax impact of giving from social impact of the gift itself. No more rushing at year-end to get your tax-deduction. Plus, the only tax deductions you have to track are the contributions to the DAF, not all of the individual grants from your DAF that you make after that. Let’s look at a couple of the key benefits of using a DAF, as well as a few important caveats to using them:

Benefits of using a DAF:

  • Simplify and streamline your giving. Forget adding up all those $50 and $100 checks you wrote throughout the year. With a DAF, just track the initial contribution(s) for your tax deduction. Plus, most DAF custodians will provide you with an itemized list of your giving to give you a snapshot of your giving history.
  • Invest and grow your charitable dollars. Giving to a DAF allows your donated assets to keep growing. Just like your other investment accounts, a DAF can be invested and can grow while the funds wait to be used.
  • Donate complex assets. Many nonprofits don’t have the knowledge, expertise, or capacity to accept complex assets like appreciated securities, real estate, or business ownership interests. But often these assets carry the biggest tax savings. DAF custodians can easily handle these kinds of assets and convert them to cash for you to send to your favorite charity.
  • Maximize tax impact. Bundling multiple years of charitable giving into one year can help some taxpayers raise their charitable deduction enough to exceed the standard deduction (currently $25,100 for couples filing jointly and $12,550 for single filers). Many people don’t give enough in any one year to exceed the standard deduction and therefore miss the tax benefits of giving. A DAF solves this problem.
  • Deduct taxes now, support charities on your own timeframe. Putting money into a DAF qualifies as a tax deduction when you make the gift, and allows you to make grants out of your fund in future years. This especially benefits people who have high-income years now (when the deduction is most valuable), but expect income to be lower in the future.
  • Engage future generations in philanthropy. Donors who use DAFs can name successor advisors to take over the fund at a future date. This creates opportunities for families to talk about philanthropy and pass down philanthropic values.

DAF Caveats

  • Avoid DAFs for IRA Qualified Charitable Distributions (QCDs). Due to tax law restrictions, DAFs aren’t eligible to receive QCDs. It’s still possible to send money from your IRA to a DAF, but you’ll need to recognize the income first and then take a tax deduction for the contribution. You can still use the QCD technique to give to other charities. Talk to your advisor for guidance about which giving strategies make sense for you.
  • Plan your future giving before you fund your DAF. Donations to a DAF are considered a completed gift, meaning that you can’t pull those funds back for your own use. Make sure that you only give funds that you intend for charitable purposes and won’t need later for your own expenses.
  • You can’t use a DAF for gifts to individuals or entities that aren’t tax-exempt. In accordance with tax law, grants out of DAFs can only go to registered tax-exempt public charities, so gifts to individuals and other entities don’t qualify.


Donor advised funds simplify and streamline your charitable giving while also maximizing the tax benefits of those gifts. Plus, they’re easy to set up and manage. Talk to your financial advisor for help on how to get started.



    Written by Jake Martin, Client Advisor