Your Wealth

Donor Advised Funds: A Smarter Way to Give Strategically and Tax-Efficiently

When most people think about charitable giving, they picture writing a check or clicking “donate” on a nonprofit’s website. But if you want to give more strategically and potentially reduce your tax burden, a Donor Advised Fund (DAF) may be worth considering.

Donor Advised Funds have become one of the fastest-growing charitable giving tools in the U.S. Here’s what you need to know and how they can fit into your financial plan.

What Is a Donor Advised Fund?

A Donor Advised Fund is a charitable giving account established through a sponsoring organization, such as a community foundation or financial institution.

When you contribute cash, stocks or other assets to a DAF:

The assets are irrevocably donated to charity.
You receive an immediate tax deduction.
You can recommend grants to nonprofits over time.

Think of a DAF as a charitable investment account: you fund it now, receive tax benefits today and decide later how and when to support the causes you care about.

The sponsoring organization manages investments, handles administration and ensures grants go to qualified charities, while you retain advisory privileges.

Why Donor Advised Funds Are So Popular?

Donor Advised Funds continue to grow because they combine simplicity, flexibility and tax efficiency in one solution.

Key advantages include:

Streamlined recordkeeping (one tax receipt instead of many)
Flexible timing for donations
Professional investment management
Lower cost and complexity than private foundations

For many individuals and families, DAFs make it easier to integrate philanthropy into a broader financial and estate plan.

Key Tax Benefits of Donor Advised Funds

One of the biggest advantages of a Donor Advised Fund is the ability to separate when you give from when you receive tax benefits*.

Immediate Tax Deduction
You can claim a charitable deduction in the year you contribute:
- Up to 60% of adjusted gross income (AGI) for cash donations
- Up to 30% of AGI for long-term appreciated assets
- Excess deductions may be carried forward for up to five years
Capital Gains Tax Savings
Donating appreciated assets—like stocks or mutual funds—can be especially powerful:
- Avoid paying capital gains tax on the sale.
- Receive a deduction based on full fair market value.
- Maximize the impact of your donation.
Tax-Free Growth Potential
Assets held in a DAF can be invested and grow over time:
- Investment earnings are generally tax-free.
- Growth can increase your long-term charitable impact.
Estate Planning Benefits
Contributions to a Donor Advised Fund:
- Reduce the size of your taxable estate.
- Remove future asset appreciation from estate taxes.

Who Should Consider a Donor Advised Fund?

A Donor Advised Fund isn’t for everyone, but it can be especially effective in these situations:

High-Income or Variable-Income Years

If you experience a liquidity event, such as selling a business or receiving equity compensation, a DAF allows you to:

Take a large deduction in a high-income year.
Distribute charitable gifts gradually.

Donors with Appreciated Assets

If you hold highly appreciated investments, donating them directly can significantly improve tax efficiency.

Families Focused on Legacy Giving

DAFs allow you to name successors (such as children or grandchildren), helping build a multi-generational charitable strategy.

Donors Seeking Simplicity

Compared to private foundations, DAFs:

Require less administration
Offer consolidated reporting
Reduce ongoing complexity

Important Considerations Before Opening a DAF

While Donor Advised Funds offer many advantages, there are some key trade-offs:

Irrevocable Contributions

Once assets are contributed:

They cannot be withdrawn for personal use.
The sponsoring organization has ultimate control over distributions.

No Required Distributions

Unlike private foundations, DAFs generally have no minimum annual payout requirement. While this offers flexibility, it also places responsibility on you to ensure funds are actively used for charitable purposes.

Limited Grant Use

Grants cannot provide personal benefit, such as event tickets or memberships tied to perks.

Donor Advised Funds vs. Private Foundations

Both DAFs and private foundations support charitable giving, but they differ in complexity and control.

Donor Advised Funds:

Easier to set up and manage
Lower costs
Fewer regulatory requirements

Private Foundations:

Greater control and visibility
Required annual distributions
Higher administrative and compliance burden

For many donors, a DAF offers the right balance between control and simplicity.

The Bigger Picture: Giving with Purpose

While tax benefits are important, research shows that most donors are motivated by something deeper: impact, purpose and personal fulfillment.

A Donor Advised Fund can help align:

Your financial strategy
Your charitable goals
Your long-term legacy

By making giving more intentional and organized, DAFs help ensure your contributions create meaningful and lasting change.

Final Thoughts

If charitable giving is part of your financial plan, or something you want to prioritize, a Donor Advised Fund can be a flexible, tax-efficient way to make a difference.

For more information, please reach out to your Wealth Relationship Manager or visit here.

*State tax treatment may vary. Consult tax advisor for details.

This material is provided for educational purposes only and does not constitute tax or legal advice. Charitable giving strategies should be reviewed in the context of your personal financial situation.

Atlantic Union Bank Wealth Management is a division of Atlantic Union Bank that offers asset management, wealth banking, and trust and estate services. Securities are not insured by the FDIC or any other government agency, are not deposits or obligations of Atlantic Union Bank, are not guaranteed by Atlantic Union Bank or any of its affiliates, and are subject to risks, including the possible loss of principal.