The Donor-Advised Fund

This was us every year up ‘til now (tell me if this is familiar): the end of the year rolls around, and amidst all the Christmas hustle and bustle, we suddenly realize we need to make our charitable giving decisions and contributions before 31 December. And so we find ourselves hastily “peanut buttering” donations across various organizations—a little here, a little there—just to add up to a certain target dollar amount and in time to get processed before the new year.

More financial triage than intentional charitable giving.

Enter donor-advised fund (DAF)

A DAF changes this dynamic: you contribute money (or stock) to the fund and receive an immediate tax deduction. The funds are invested and grow tax-free. Then you distribute “grants” to charities on your own timeline, which could be next month but it could also be a decade from now.

You’ve effectively separated the tax break from the actual giving.

Benefits

1. Tax efficiency: Take the deduction when it makes sense for your tax situation; not necessarily when you’re making a charitable contribution.
2. Administrative simplicity: Make one contribution to your DAF and get one tax receipt, then distribute to multiple charities over time without additional tax paperwork.
3. Thoughtful giving: You can research organizations, respond to real needs as they arise (or pause as you anticipate some greater future need), and give with a bit more intentionality now that you’ve removed the time pressure. (More on intentional giving in this post.)
4. Portfolio optimization: DAFs are ideal for donating appreciated securities, turning portfolio cleanup into charitable impact while maximizing tax benefits.
   • Practical example: We recently used our DAF to donate a good amount of highly appreciated individual stocks (some with 400%+ gains), which killed three birds with one stone: eliminated a tangled mess of 22 tax lots we’d been wanting to consolidate, avoided a boatload of embedded capital gains tax, and generated a separate boatload in total tax savings whilst pre-funding a healthy runway of charitable giving.
5. Growth potential: Charitable dollars grow tax-free before you distribute them, potentially (hopefully) increasing your total charitable impact.
6. Anonymous giving: Most DAF providers allow you to give anonymously—the charity sees the payment from the sponsor (e.g., “Vanguard Charitable”) without your identifying information. While public giving has its place, anonymous giving offers benefits around humility, self-effacement, privacy, and avoiding inequality dynamics.

Aren’t DAFs for the ultra-wealthy?

Well that there’s a big misconception, my friend. They’re more accessible than you’d think with many providers¹ setting initial contributions at or below what many families already give to charity annually, and even others offering accounts with zero minimum. Basically, you might already be giving enough to make a DAF worthwhile—or could be, Mr. and Mrs. Scroogie McScroogeface.

Think of a DAF as sitting alongside your other tax-advantaged accounts:

If you’ve ever felt the aforementioned year-end crunch, and if you’d like to be more purposeful with your philanthropy, a donor-advised fund might be just the thing that’s missing from your financial quiver³.

And Happy Boxing Day—how apropos,

— ᴘ. ᴍ. ʙ.

First published: 2025-12-26 | tweet | cast | subscribe

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