What Is a Donor Advised Fund (DAF)? A Simple Guide to Smarter Giving

If you’re looking for a flexible, tax-efficient way to support the causes you care about, a Donor Advised Fund (DAF) might be exactly what you need. Whether you’re donating cash, stock, or complex assets, a DAF makes charitable giving easier to manage and potentially more impactful.

So, What Is a Donor Advised Fund?

A DAF is a charitable giving account established under the umbrella of a public charity, typically a community foundation or the charitable arm of a financial institution. Here’s how it works:

1. Donate
You contribute cash, stock, or other assets to your DAF. You’ll receive an immediate tax deduction, even if you choose to give the funds to charities over time.

2. Advise
You recommend grants to your favorite qualified nonprofits whenever you’re ready. The DAF sponsor reviews and processes the grants on your behalf.

3. Grow
Your DAF balance can be invested, giving your donation the potential to grow tax-free until you’re ready to distribute it.

Why Use a DAF?

• Immediate tax benefits when you contribute, not when you make grants. Gains while vesting are tax-free.
• Simplicity. DAFs simplify record keeping and avoid multiple receipts since all your giving is done through one account.
• Strategic philanthropy. Invest the funds and give over time after they’ve grown.
• Family involvement. Bring children or heirs into your charitable journey by appointing them to a board.

Example:
Jane contributes $10,000 to her DAF at Schwab’s DAFgiving360. She receives a tax deduction this year, then recommends grants over several years to animal shelters and education nonprofits.

Can the DAF Say “No” to Your Grant Requests?

In most cases, they follow your recommendations. But there are exceptions:

• The charity must be a registered 501(c)(3) public charity.
• Funds can’t be used for political purposes, tuition, dues, or anything that gives you or your family a personal benefit.
• Recommendations that violate IRS rules or the sponsor’s policies will be denied.

That said, the vast majority of recommendations are approved, especially for routine, well-documented grants.

Is a DAF an Account or Its Own Charity?

A DAF is not an independent nonprofit. It’s an account within a larger nonprofit. That nonprofit (called the “sponsor”) legally owns the funds and manages them.

 

Who Offers DAFs?

There are three main types of DAF sponsors:

1. National DAF Charities

These are independent public charities created for the purpose of offering DAFs. They are not-for-profit organizations but often have close relationships with their affiliated financial institutions. Examples include DAFgiving360 (previously known as Schwab Charitable), Fidelity Charitable, and Vanguard Charitable. 

2. Community Foundations

Local or regional public charities that offer DAFs as one of several services and offer local expertise. Examples include Silicon Valley Community Foundation and New York Community Trust.

At Summitry, we’ve taken a similar local approach through our philanthropic initiative, Summitry Cares. Established in 2012, it supports volunteerism and manages our Donor-Advised Fund, which is structured as an endowment. Each year, we direct grants to trusted nonprofit partners making a difference in the Bay Area such as Life Moves, Youth on Course, and the Parkinson’s Foundation, while also leaving room to support broader causes. For those in the Bay Area who want their donations to support local, vetted causes with proven impact, Summitry Cares offers a trusted and effective avenue.

3. Cause-Based Charities

Some large nonprofits offer DAFs focused on supporting their specific missions or causes. Examples include universities, hospitals, and faith-based organizations.

Learn How One Summitry Client Used DAFs to Offset His Tax Bill

What Are the Minimums to Start a DAF?

Always check with the specific sponsor, as policies vary. Minimums above reflect the most recent information as of May 2025 and are subject to change.

What Are the Fees?

Yes, there are ongoing fees for operating a DAF. These fees vary by sponsor but generally include:

Administrative Fees:
 0.60%–1.00% annually, decreasing with larger balances. They typically cover things like recordkeeping, grant processing, tax reporting, and customer service.

Investment Fees:
 0.05%–0.50%, depending on your chosen funds (mutual funds, ETFs, etc.).

Other Fees:
 You might pay extra for processing complex assets like real estate.

A Note on Complex Assets

• Complex assets are non-cash, non-publicly traded assets that can include:
• Real estate (residential, commercial, undeveloped land)
• Private business interests (C-corp, S-corp, LLC shares, sole proprietorships)
• Limited partnership (LP) interests
• Hedge fund and private equity interests
• Restricted or non-publicly traded stock
• Intellectual property (patents, copyrights)
• Oil, gas, and mineral rights
• Collectibles, artwork, jewelry, and other tangible personal property
• Cryptocurrency (Bitcoin, Ethereum, etc.)
• Insurance policies

Donating complex assets to a DAF can offer major tax advantages. Donors often avoid capital gains taxes and may receive a fair market value deduction, making it a highly efficient way to give. The DAF sponsor handles the sale, legal review, and compliance, simplifying the process. Once liquidated, the funds can support multiple charities over time, extending the impact of the gift.

That said, not all DAFs accept every asset type, and each donation is reviewed individually. The process may take weeks or months, depending on the complexity. Professional tax or legal advice is strongly recommended to ensure compliance and maximize benefits.

Are the Funds Invested?

Yes! One of the major advantages of a DAF is that your contributions can be invested and grow tax-free while waiting to be granted. Sponsors usually offer investment pools like index funds, socially responsible funds, or access to independent investment advisors. 

Are There Taxes on Investment Gains?

No. Any growth in your DAF is tax-free, and there are no taxes on grants you make to charities. Once the assets are in the DAF, they belong to the sponsor (a 501(c)(3)), so all investment growth is sheltered from tax.

How Is a DAF Different from a Private Foundation?

Can You Get the Money Back?

No. Contributions to a DAF are irrevocable. Once you donate, the money belongs to the sponsor. You can recommend grants, but you cannot take funds back or use them for personal expenses. Doing so risks penalties and disqualification.

Final Thoughts

Donor Advised Funds offer a streamlined, strategic, and tax-advantaged way to support the causes you care about. Whether you want to simplify your giving, involve your family, or grow your charitable impact over time, a DAF is a powerful tool worth considering.

Have questions or a specific scenario in mind? Reach out to one of our Summitry advisors. We’re happy to help you determine if a DAF is right for you.

Learn How One Summitry Client Used DAFs to Offset His Tax Bill

 

 

This material is intended for general informational purposes only, and should not be construed as legal, tax, investment, financial, or other advice. It does not consider the specific investment objectives, tax and financial condition or needs of any specific person. While information in this content comes from reliable sources, no guarantee of accuracy or completeness is provided.