Charitable Giving Through Donor-Advised Funds

When you make a charitable donation, how do you do it? Most people donate through "checkbook giving," meaning that you decide how much to donate, select a charity, and send a payment. Often, this requires writing a check, processing a credit card, or even using electronic payment services like Venmo or PayPal.

The way many wealthy give is to take their money and set up a foundation, transfer money into it, have it grow, and then give money away over time. You're probably familiar with the wealthiest charitable foundation in the United States, the Bill & Melinda Gates Foundation. Setting up and maintaining a private foundation comes with administrative expenses so it's not for everyone.

Maximize your charitable giving with a donor-advised fund

Increasingly, Americans are moving from supporting their favorite charitable causes with ‘checkbook giving’ to the ease, convenience, and effectiveness of donor-advised funds (DAF.)  Donor-advised funds are also one of the fastest growing charitable vehicles with contributions now representing 7.6% of total individual giving in the US.1

A donor-advised fund is a charitable giving program that allows even small-scale givers to put money into an account, let it mature, and then disburse it gradually. This combines the most favorable tax benefits with the flexibility to support your favorite charitable causes at virtually any time. To establish a DAF, you make an irrevocable charitable contribution to the public charity that sponsors the program; that contribution is then invested and may grow tax free; and you are able to recommend grants to eligible 501(c)(3) public charities at any time. Donor-advised funds also let you specify whether you’d like the grant to be made anonymously or be acknowledge for the support.

Tax planning

When you deposit money into a donor-advised fund, you are making an irrevocable charitable donation to the donor-advised fund so it leaves your estate. If you have a big earning year, you can use the DAF to time your deduction, depositing money in the DAF in years when your earnings permit you to receive a greater tax benefit, and then grant the money to qualified charities over a period of years. In other words, you get the tax break in the year the money goes into the fund, not when it’s distributed to charity.

Grow your giving

Contributions made to a public charity with a DAF program can be invested with the potential to grow, tax-free – ultimately resulting in additional dollars for charitable grants. A DAF program can offer a variety of investment options to help you meet specific investment goals for your charitable assets. If you place enough money in the account (at Fidelity Charitable and Schwab Charitable, for instance,  it's $250,000), you can choose to have an investment advisor manage the investments. 

Additionally, a DAF can be funded with certain assets beyond cash equivalents or publicly-traded appreciated securities.These assets can often be highly appreciated and donating them to charity can potentially eliminate large capital gains exposure, allowing the charity to ultimately receive more support.

With a donor-advised fund you can:

  • Make a tax-deductible donation. Donate cash, stocks, real estate or non-publicly traded assets to your DAF and get your tax receipt.
  • Support charities you love, now or over time. You can support any IRS-qualified public charity with the money you’ve put into your donor-advised fund. 
  • Grow your donation, tax-free. While you’re deciding which charities to support, your donation will be invested so it has the potential to grow tax-free and generate even more money for the causes you care about.2
  • Support any charity. You can use your DAF to support all the same charities you do today, whether it’s your alma mater or a friend running a marathon for a good cause.
  • Get one tax receipt. As soon as you donate to your DAF, you’ll be eligible for a tax deduction—just like any other charitable donation you make. And no matter how many charities you support throughout the year, you’ll only have one tax receipt to keep track of—the one you get from us.
  • Donate cash, stocks and more. Unlike many smaller charities, many DAFs can accept a wide range of financial assets, from cash and checks to stocks, bonds and even non-publicly traded assets like real estate.  

If you'd like to learn more about donor-advised funds to see if it makes sense for your long-term charitable giving needs, contact us for more information. One of our advisors would be happy to chat with you.

free portfolio review

Photo by Katt Yukawa on Unsplash

What charities and causes that are important to you? Are you seeking a more structured way to make donations and involve your children in the process?

  1. 2015 Donor Advised Fund Report, National Philanthropic Trust
  2. Donations are invested and investing involves risk. The value of an invested donation will fluctuate over time and may gain or lose money.


Share This Story, Choose Your Platform!

About the Author: Andrew Wang

Andrew Wang


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede.  Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Search Website

Annuity Review Database

Follow Our Podcast

Google Podcasts
Apple Podcasts

Recent Posts