funds are invested and when and where disbursements should go.
The vehicle is not new. The oldest known example is the New York Community Trust, a sort of community foundation established in 1931 to serve the New York metropolitan area.( It’ s still functioning today.) In the 1990s, Fidelity, Schwab, Vanguard and other commercial sponsors created their own models, and donor-advised funds took off. By 2023, the most recent figures available, there were some two million of these charitable vehicles in the U. S. representing $ 251.5 billion in assets, according to the National Philanthropic Trust.
For the most part, the biggest sponsoring firms don’ t make their total charitable assets public. But according to their Form 990 tax filings, in the most recent 12-month period, Fidelity sponsored $ 14.9 billion in donor-advised fund grants, while DAFgiving360, which manages donor-advised funds for Schwab, granted $ 8.9 billion. Vanguard granted more than $ 3.5 billion of some $ 25 billion in donor-advised fund assets it stewards.
The sophistication of these products“ has grown just in the 15 years I’ ve been in this industry,” says Tim Kingsbury of Veris Wealth Partners in New York City. Some of the funds can hold high-risk, rapid-growth investments while others offer sustainable, social-impact options, and there are plenty that have more traditional choices.“ DAFs also offer the most flexibility in deciding when to disburse funds,” Kingsbury says.
Donor-advised funds accept donations of cash, stock or other assets. All the donations are irrevocable, and the donor receives an immediate tax deduction, though the distributions to a charity or charities can happen years later.
Any growth in the account’ s value is reinvested tax-free, but the donor must not profit from that growth or from the account in any way other than the tax deduction. The assets“ cannot be used for personal benefit,” says Cameron Barsness of Kutscher Benner Barsness & Stevens Financial Counsel in Seattle.“ For example, a client cannot purchase an auction item at an annual charitable event [ using funds from a donor-advised fund ].”
Donors can, however, request distributions to specific nonprofits or causes as they desire. There are no regulations saying how much money these funds should distribute annually( an advantage the vehicles have over private foundations, which must distribute 5 % of their fair market value every year)— although some donor-advised fund sponsors might set a yearly minimum. Donors can also make additional donations to the donor-advised fund whenever they like, in exchange for another tax deduction.
The funds are not right for every client, however; for instance, they can’ t be used for qualified charitable distributions from an IRA( the direct transfers that clients age 70½ or older can make to reduce the taxable income in their IRA accounts without penalty).
The ideal candidates for a donor-advised fund, Blagrove says, are those who want to bunch together their charitable dollars to surpass the standard deduction threshold and claim an immediate tax deduction, or else they are wealthy clients who think in terms of annualized donations over a period of years. Otherwise, charitably minded folks could just make gifts directly to their favorite nonprofits.
Estate Planning
Some clients might like donor-advised funds because the vehicles support their estate planning.“ They enable the preplanning of recurring and ongoing grants, integrating seamlessly into estate and legacy plans,” says Fred Kaynor, managing director of Schwab’ s DAFgiving360.“ For charitably minded individuals, a plan to support charities through their estate is an effective and easy way to fulfill a charitable legacy.”
A donor-advised fund can designate a charity to receive all remaining assets after the account holder dies. The funds can also be the beneficiaries of an inherited IRA. Or they can name a different owner to take over the role of donor-advised fund advisor when the original owner dies. Clients“ should be prepared to choose one option or the other when setting up the fund,” says Helen Andreoli of Great Diamond Partners in Portland, Maine.
But some advisors warn that gifting to family members is generally a better way to reduce estate taxes. The One Big Beautiful Bill even extended deductions for federal estate, lifetime gift and generation-skipping transfer taxes that were due to expire; in fact, the law mandates increases for those exemptions next year, and every year thereafter to keep pace with inflation.( The annual gift tax exclusion remains at $ 19,000 per recipient, but the lifetime gift and estate tax exemption increases to $ 15 million per taxpayer in 2026. Gifts to spouses who are U. S. citizens are not subject to gift taxes.)
In general, though, clients don’ t make donor-advised fund contributions simply to save tax money.“ Americans are very generous,” says Nick Cherney, head of innovation at Janus Henderson Investors. Tax savings is not the primary driver of most people’ s giving habits, although clients naturally want to get the maximum available tax benefit for any charitable giving they do, he says.
“ One of the biggest values that a [ donor-advised fund ] provides is the ability to recognize the tax benefit today of multiple years of charitable giving,” he says.“ And when those tax benefits are higher this year than they will be in future years, the attractiveness of a DAF just goes up.”
DECEMBER 2025 | FINANCIAL ADVISOR MAGAZINE | 41