What are the key strategies for using a donor-advised fund (DAF)?

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AcadiFi · Accepted Answer

A donor-advised fund is a charitable account at a sponsoring organization (Fidelity Charitable, Schwab Charitable, Vanguard Charitable, community foundations) where contributions are irrevocable and immediately tax-deductible, but grants to operating charities can be made over any timeline. Three key strategies. One, bunching. Post-TCJA, standard deduction ($32,300 MFJ 2026) exceeds many itemized totals, so small annual charitable gifts yield no deduction. Bunch 3-5 years of gifts into a single year's DAF contribution to itemize that year, then take standard deduction in off years. Example: Raphael donates $12K/year to charities but takes standard. Instead, contribute $48K to DAF in year 1 (itemizes, saves $48K*32% = $15,360 vs if all were bunched deduction; saves $48K*32% - $32,300*32% = $5,024 vs 4 years of standard), then grant $12K/year from DAF to charities. Two, contribute appreciated securities. Donating long-term appreciated stock (e.g., $50K cost basis now worth $180K) yields deduction for fair market value ($180K) AND avoids capital gains tax on $130K gain ($130K * 23.8% = $30,940 saved). Charity sells tax-free inside DAF. Three, estate planning simplification. Single DAF account vs. many charity beneficiaries in will, successor advisors (heirs) can continue grantmaking, enabling multi-generational philanthropy without legal entity. ```mermaid graph TD A[Donor
DAF contribute] --> B[Immediate
deduction] A --> C[Tax-free
growth] C --> D[Grant to
charities] ```

What are the key strategies for using a donor-advised fund (DAF)?

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