A Beginner’s Guide to Donor-Advised Funds

by | Nov 9, 2023

Are you interested in charitable giving but aren’t sure of all of your options? Many charitably-minded people want to ‘graduate’ from writing checks directly to a charity, but may not be ready to establish their own charitable foundation.  Consider a donor-advised fund (DAF). 

This charitable giving vehicle allows donors to make a contribution and receive an immediate tax deduction while retaining flexibility in selecting the ultimate charitable beneficiaries.

For those new to DAFs, it can be overwhelming to navigate the nuances of these programs. This beginner’s guide to DAFs aims to provide an overview of these funds, including their tax benefits, investment opportunities, grant recommendation options, and more.

Tax Benefits

One of the greatest benefits of a DAF is the immediate tax deduction donors receive for contributions to the fund. If a donor contributes appreciated securities instead of cash, they may also benefit from additional tax savings. Note that there are guidelines for how much must be distributed annually, usually around 5%. Donors should consult with a financial advisor and accountant when considering a DAF.

Investment Options

DAFs offer donors investment options that can potentially increase the amount available for charitable giving over time. However, it’s important to remember that investments may lose money, which could ultimately decrease the amount going to charity. Donors should also ensure they understand the fees associated with investing through a DAF before making contributions for investment.

Grant Recommendations

Donors can recommend grants from their DAF to eligible charities of their choice. This is an attractive feature for donors who want to be more involved in their philanthropy. It’s important to note that if a charity is lesser-known, the DAF custodian may have to take some time to vet the charity. Most DAF custodians will have an online platform for you to select the ultimate charitable beneficiaries and monitor your account balances and activity.


Donors can choose to remain anonymous when making grant recommendations from their DAF. This anonymity can provide greater comfort for donors when discussing contributions and charities they support.


You can make gifts to a DAF by using appreciated securities instead of cash – this may have some tax benefits, depending on your situation. You should consult a financial advisor and accountant when considering a DAF. 

DAFs can be a good option for those who make regular charitable contributions but who do not give enough to capture the tax benefits. 

By “grouping” donations to a DAF for two or more years’ worth of giving, donors may be able to deduct more of their contributions. Some DAFs require minimum contributions to establish a fund, so be sure to research the specifics of each option before making a final decision.

In conclusion, donor-advised funds are an excellent choice for charitable giving. It offers a streamlined and efficient way to manage philanthropic activities. By consolidating charitable giving into a single fund, donors can simplify their financial record-keeping and administrative tasks. This allows them to focus more on the causes they care about and spend less time on paperwork.

While donor-advised funds offer many advantages, it is important for donors to conduct due diligence and thoroughly vet the chosen charities. Understanding the fees and investment options associated with each fund is also crucial. By doing so, donors can ensure that their contributions are being used effectively and in line with their philanthropic goals.

For more money-saving tips and financial planning advice, visit our website and read our blogs at Kreitler Financial. Learn more about our services and work with our experienced financial advisors today!