Giving to Charity? Learn the Ins and Outs of Donor-Advised Funds
These simple, low-cost vehicles tend to be the most efficient and effective ways to engage in charitable giving.

According to the National Philanthropic Trust, Americans gave $358.38 billion to charities in 2014, a 7.1% uptick from the previous year. And with the deadline for deducting charitable contributions approaching on Dec. 31, now is a good time to give back to an organization and/or support a current relief effort.
While there are multiple vehicles available to help support philanthropic giving, we find that donor-advised funds (DAF) tend to be the most efficient and effective giving vehicles. They are simple, low cost, and flexible. They allow donors to maximize the tax benefits of charitable giving while supporting their favorite organizations.
What is a Donor-Advised Fund?

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
A DAF is simply an account that helps givers manage their charitable contributions. Through an agreement with a DAF provider, a donor creates a specially named account (i.e. “Smith Family Fund”) to which irrevocable contributions are made. The donor receives an immediate tax deduction but is not forced to make any grants. They can work with their adviser to invest and grow the assets and recommend grants to their favorite non-profit, 501(c)(3) organizations at their leisure.
Why Use a Donor-Advised Fund?
Simplicity. Unlike a private foundation, the donor is not responsible for hiring attorneys and accountants or maintaining a board of directors. The sponsoring organization that holds the fund takes responsibility of all the expensive administration work, including filing annual returns and preparing financial statements.
Tax Efficiency. DAF contributions provide a federal income tax deduction up to 50 percent of adjusted gross income for cash contributions and up to 30 percent of adjusted gross income for appreciated securities. Along with publicly traded securities, DAF holders can also contribute complex assets such as real estate, limited partnership interests, private C- and S-Corp stock, and other privately held assets.
Flexibility. DAF holders receive an immediate tax deduction for their contribution but they are not subject to a legal minimum payout requirement like a private foundation. The flexibility helps donors maximize tax benefits while helping them be more systematic and methodical about their giving.
If you haven’t engaged in charitable giving yet, now is a great time to start. And in doing so, consider the benefits of a DAF—to you and to the future recipients.
Taylor Schulte, CFP® is founder and CEO of Define Financial, a San Diego-based fee-only firm. He is passionate about helping clients accumulate wealth and plan for retirement.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Taylor Schulte, CFP®, is founder and CEO of Define Financial, a fee-only wealth management firm in San Diego. In addition, Schulte hosts The Stay Wealthy Retirement Podcast, teaching people how to reduce taxes, invest smarter, and make work optional. He has been recognized as a top 40 Under 40 adviser by InvestmentNews and one of the top 100 most influential advisers by Investopedia.
-
How to Turn Your Retirement Dreams into Reality (Despite Your Fears)
Stressing over shrinking savings, rising healthcare costs, or losing your purpose can give you chills, but smart money moves can lead to financial freedom and a happy retirement.
-
Figma IPO: Should You Buy FIG Stock?
The Figma IPO has plenty of buzz building around it, with the design software company expected to start trading next week.
-
A Financial Planner's Prescription for the Headache of Multiple Retirement Accounts
Having a bunch of retirement accounts can cause unnecessary complications. Consolidation can make it easier to manage your savings and potentially improve investment outcomes.
-
Overpaying for Financial Advice? A Financial Planner's Guide to Fees
Take five minutes to review how much you're paying for financial advice. If you're overpaying, you could be better off with an adviser who charges a flat fee.
-
The Big Red Bucket Theory: A Financial Adviser's Simple Way to Visualize Your Retirement Plan
When you think about retirement, picture a big red bucket brimming with all the money you've saved. It's everything you've got, and it has to last you.
-
Are You a Doormat at Work? The Hidden Cost of Excessive People-Pleasing
I talked to the author of the upcoming book 'Fawning,' and she explains how the 'fawn' response can lead to blurred boundaries, difficulty asserting needs and a loss of self, with serious emotional consequences like anxiety and PTSD.
-
A Guide to Personalizing Your Retirement Plan for Maximum Impact
This strategy challenges conventional retirement rules of thumb by combining traditional savings, home equity and annuities to provide higher income and liquid savings and help cover long-term care costs.
-
How Advisers Can Rev Up Sales With Medicare
Help boost your revenue stream by integrating Medicare solutions into your financial practice for long-term client value and profits.
-
Take It From a Tax Attorney: This Is a Magic Multimillion-Dollar Tax-Saving Strategy
The qualified small business 1202 stock exemption is a $10 million exclusion that seems too good to be true and is often overlooked.
-
What Would You Like to Leave Behind? A Financial Planner's Guide to Family Wealth Discussions
Communicating about your assets and plans for passing them on increases clarity while preventing surprises and family disputes.