CHARITABLE PLANNING
Gillian Howell
5 Reasons To Offer Clients A Donor-Advised Fund
These charitable vehicles do more than just help philanthropists.
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LTHOUGH THE YEAR-END“ GIVING SEASON” HAS COME and gone, donor-advised funds( sometimes called“ DAFs”) remain more popular than ever for charitable giving and investing, primarily because they are easy to use and offer myriad tax advantages. They are also useful for legacy planning, for helping clients strengthen family ties, and for deepening advisor-client relationships through values-based conversations.
The rapid growth of these vehicles over the past 20 years has attracted attention from entrepreneurs and investors, leading to new tools and services( such as online portals and lower minimums) aimed at expanding the market and making them even more accessible— so much so that the DAF Research Collaborative has reported the total number of donor-advised fund accounts reached a record high of 3.56 million and assets grew 27.5 % to $ 326.45 billion in 2024.
Simply defined, a donor-advised fund is a tax-deductible financial account that’ s sponsored by a 501( c)( 3) nonprofit organization such as a public charity, hospital or university. Donors may receive tax advantages on the financial contributions they make to the vehicles, and they can advise the fund’ s sponsor by recommending grants be made from it to other charitable organizations.
Donor-advised funds boast many advantages that can benefit your clients year-round— not just during the fourth quarter. Here are five key reasons to
Donor-advised funds boast many advantages that can benefit your clients year-round— not just during the fourth quarter. encourage your clients to establish these accounts now to make the most of their giving and enhance their overall financial planning:
1. Maximized Tax Efficiency
These funds allow users to take an immediate tax deduction. Donors receive an immediate federal income tax deduction for contributions they make to the funds, regardless of when the monies are distributed to charities. This is especially useful in clients’ high-income years and can be further augmented with techniques such as“ bunching,” where several years of donations are combined into a single tax year.
Donor-advised funds can also help clients reduce their capital gains tax. By donating appreciated, long-term assets, such as stocks or real estate, clients can bypass capital gains tax while still receiving a tax deduction at fair-market value.
The funds also offer tax-free growth. Contributed monies can be invested and grow tax-free within the donor-advised fund, increasing the total amount available for charitable giving over time.
2. Complex Assets Are Welcome
Beyond cash and publicly traded securities, many donor-advised funds can accept a wide range of assets including real estate, privately held company stock and cryptocurrency. This is a key benefit for clients whose wealth is concentrated in less traditional holdings. The policies at
JANUARY / FEBRUARY 2026 | FINANCIAL ADVISOR MAGAZINE | 19