Charitable giving is one of the most impactful ways to support the causes and communities you care about. Whether you’re a seasoned philanthropist or just exploring how to begin, a donor-advised fund (DAF) can be a powerful and flexible tool to amplify your giving. Donor-advised funds allow you to make a charitable contribution today, receive an immediate tax deduction, and recommend grants to nonprofits of your choice in the future.

Wondering if a DAF is right for you? Read on to learn more about the key benefits of donor-advised funds and when they can be most useful.

Benefits of Donor-Advised Funds

Donor-advised funds (DAF) offer an efficient and impactful way to support the causes you care about while also providing a range of financial advantages. Whether you’re making a one-time contribution or planning a long-term giving strategy, a DAF allows you to give with greater flexibility, intention, and tax efficiency.

One of the key benefits of a DAF is the immediate tax deduction you receive when you contribute. Even though the money may not be granted to a charity right away, you can claim a deduction in any year you contribute to a DAF. This is especially helpful in high-income years or when offsetting capital gains. If your deductible amount exceeds your adjusted gross income (AGI) deduction cap, you can carry the unused portion forward for up to five years.

After being deposited into a DAF, your contributions can be invested and grow tax-free. This means your charitable dollars can compound over time, giving you the opportunity to make an even greater impact when you’re ready to distribute funds to the nonprofits of your choice. A DAF has no annual distribution requirements or minimum grant amounts. This gives you the flexibility to support causes on your own timeline. Because a DAF has no required end date, you can keep growing your assets over time and remain prepared to support emerging causes as they arise.

Another key benefit is simplicity and centralized management. A DAF consolidates your charitable contributions in one place, making it easier to organize your giving, track your impact, and maintain proper documentation for tax purposes. You can remain anonymous if desired, involve your family in decisions, or begin creating a long-term philanthropic legacy. Many sponsors also offer tools and support to help you identify organizations aligned with your values.

When Are Donor-Advised Funds Optimal?

Donor-advised funds are especially useful when integrated into broader financial planning and tax strategies. One of the most effective ways to leverage a DAF is during a high-income year. If you’re expecting a significant rise in income, perhaps from a business sale, year-end bonus, or stock option exercise, contributing to a DAF can help reduce your tax burden. Cash contributions are deductible up to 60% of your adjusted gross income (AGI), while appreciated securities are deductible up to 30% of AGI. Any unused deductions can be carried forward for up to five years.

Another powerful strategy involves donating highly appreciated assets. Instead of selling investments like stocks or mutual funds and triggering capital gains tax, you can contribute them directly to your DAF. This allows you to avoid capital gains taxes entirely and receive a charitable deduction based on the full fair market value, effectively maximizing your gift while minimizing tax impact.

Finally, a DAF can play a key role in estate planning and legacy building. Contributions to a DAF are excluded from your taxable estate, potentially lowering estate taxes. You can also name successors, such as children or other heirs, or establish recurring donations to ensure long-term support for the causes you care about. This makes donor-advised funds not only a smart tax strategy but also a meaningful way to extend your values across generations.

A Meaningful Way to Give

While the financial advantages are significant, the true value of a DAF lies in its ability to help you support the charities and causes that matter most to you, on your terms, and with greater efficiency. To discuss whether a DAF is best for you, reach out to your Bartlett advisor. We’re here to help you align your giving with your goals and values today and into the future.

DISCLOSURE:

The content above was authored by Samuel Goldsberry, a part-time co-op employee at Bartlett & Co. Wealth Management, LLC (Bartlett). The views expressed in this article are those of the author and are intended for informational and educational purposes only. They do not constitute financial advice or a recommendation to buy or sell any specific securities or engage in any particular investment strategy. While Bartlett provides general editorial oversight, this content does not necessarily reflect the official views or investment opinions of Bartlett or its full-time advisory personnel. Bartlett maintains ultimate responsibility for all content published on its website to ensure compliance with applicable regulations. Readers should consult with a qualified financial professional for personalized advice.