While there are many ways to make charitable gifts, a donor-advised fund (DAF) offers multiple tax benefits and an efficient platform for ongoing giving. They can be a helpful tool in your estate planning toolkit.
Once you open a DAF, you can contribute many types of assets, including cash, publicly traded stocks, bonds, CDs or non-cash items such as closely held business interests, art or collectibles. Then decide how to invest the money, potentially following a strategy your DAF sponsor suggests. Next, choose which charities to support, how often to give and how much. You can direct the money to any IRS-approved charitable organization.
Tax deductions
The standard deduction was raised in 2025 and has now been indefinitely extended.
Taking the standard deduction: A new provision in 2026 lets you deduct up to $1,000 in charitable cash contributions ($2,000 if filing jointly) made directly to qualified charitable organizations. However, contributions to DAFs are specifically excluded. You can still receive other DAF advantages, including tax-free growth and capital gains avoidance, just not a deduction for the DAF contribution itself.
Itemizing deductions: A new 2026 rule limits what’s deductible: only aggregate charitable contributions exceeding 0.5% of your adjusted gross income (AGI) are deductible. If you don’t give enough in a single year to clear that floor, a DAF’s “bunching” strategy may be effective. You combine several years of giving into one DAF contribution and distribute funds at your own pace, making the 0.5% AGI floor easier to clear.
In the 37% federal marginal tax bracket: Your itemized deduction tax benefit is now capped at 35%, applied after any other deduction-specific limits such as the 0.5% AGI floor. Factor this into your charitable giving strategy with your tax professional.
Tax-free growth of earnings for a donor-advised fund
Once you contribute an asset to a DAF, any earnings growth is not taxable to you, the DAF or recipient charities. This means charitable assets can grow, potentially increasing what recipient organizations receive.
Avoidance of capital gains taxes
When you donate appreciated stocks or other investments — or virtually any appreciated asset — to a donor advised fund, you can avoid the capital gains taxes that would be due if you sold the asset and donated the proceeds. Charities benefit because they receive the full appreciated value rather than after-tax sale proceeds. And you can still take a tax deduction for your donation.
Tradeoffs to consider
While these tax benefits can make a donor-advised fund attractive, it’s worth understanding the tradeoffs. Once you contribute assets to a DAF, that gift is irrevocable. Your investment options are also limited to what’s available in the DAF program you’ve chosen, and DAFs can incur administrative costs in addition to fees charged on the underlying investments.
Estate planning considerations
There are a number of other ways to integrate charitable giving into an estate plan, including direct bequests, charitable trusts, and giving part of your residuary estate. You can also place certain conditions or restrictions on the gifts through your estate plan. For very large gifts or more complex arrangements, a more comprehensive review with an estate planning attorney can produce a plan to ensure that all of your goals are met.
A good next step
Because DAFs can have significant implications for your tax situation, consult with your tax professional before taking action. Your financial advisor can also help you evaluate DAF benefits and tradeoffs and compare sponsors, since programs offer different features.
If a DAF is appropriate, it can be a meaningful and efficient way to support charitable giving for years to come.
Contact the estate planning attorneys at Kurre Schneps to learn how you can integrate charitable giving into your estate plan.
Thank you to Danilise Diaz, CFP at Edward Jones, Member SIPC, for providing the basis for this article.
