Donor-Advised Funds
What they are, who they fit, when to use one, and how to give through one.
A donor-advised fund separates the year you take the deduction from the years the money reaches the charities you choose. You give to the fund once, take the deduction that year, and recommend grants for as long as you like.
1 · How a donor-advised fund works
One contribution, then grants over time
The fund is held by a sponsoring public charity. You give up ownership when you contribute, keep the right to recommend how the money is invested and where it is granted, and can name family members to recommend grants after you.
2 · Who a donor-advised fund fits
| Situation | Why a donor-advised fund helps |
|---|---|
| You give every year and itemize | Grouping several years of giving into one contribution means the 0.5%-of-income floor on charitable deductions applies once instead of every year |
| You hold stock that has risen a lot | Giving the shares avoids the capital gain, and for shares held more than a year the deduction is the full market value |
| This year’s income is unusually high | A business sale, a large bonus, or a large gain. The deduction lands in the year income is taxed at the top rates, while the giving can be spread out |
| You want your family involved | Children can be named to recommend grants now and after you |
| You want simplicity | No separate tax return, board, or annual payout requirement, as a private foundation has |
It fits less well if most of your giving comes from an IRA after age 70½. IRA distributions made straight to charity are excluded from income, but they cannot go to a donor-advised fund.
3 · When to contribute to a donor-advised fund
| Timing | What to know |
|---|---|
| Before December 31 | The contribution counts for the year it is completed. Stock transfers can take days, so start early in December, not on the last day |
| In a high-income year | The deduction is worth the most when it offsets income taxed at the top rates |
| Before selling a private business | Shares given before the sale is legally committed can avoid the gain. Once a binding agreement is signed, the gain may be taxed to you anyway. Involve your attorney and CPA early |
| In years you plan to group gifts | Contribute several years of giving at once, then take the standard deduction in the years between |
4 · Donor-advised fund deduction limits for 2026
| Donor-advised fund | Private foundation | |
|---|---|---|
| Cash | Up to 60% of adjusted gross income | Up to 30% |
| Publicly traded stock held over a year | Up to 30%, at full market value | Up to 20% |
| Private shares or real estate | Up to 30%, at appraised value; a qualified appraisal is required | Generally limited to cost |
| Unused deduction | Carries forward five years | Carries forward five years |
| Annual payout | No federal requirement | About 5% of assets each year |
| Privacy | Grants can be made anonymously | Files a public annual return |
The 2026 rules for all itemized charitable gifts apply on top of these: only giving above 0.5% of adjusted gross income is deductible, and in the top 37% bracket each dollar deducted is worth 35 cents. Year-End Planning covers both.
5 · Donor-advised fund rules to know
| Rule | What it means |
|---|---|
| Contributions are irrevocable | Money in the fund can only go to charity |
| No pledges | A grant cannot be used to pay a legally binding pledge you made personally |
| No benefits in return | A grant cannot pay for event tickets, dinners, or anything else of value to you |
| Grants go to qualified charities | Not to individuals, and not to most private foundations |
| No IRA distributions in | An IRA distribution to charity cannot be directed to a donor-advised fund |
The IRS has proposed further rules for donor-advised funds that were still not final as of 2026.
6 · Giving through a donor-advised fund well
| Practice | Why |
|---|---|
| Give the shares with the largest gains | The gain avoided is largest, and the deduction is the same market value either way |
| Rebuy with cash if you still want the stock | You keep the position with a new, higher cost basis. The wash-sale rule applies to losses, not to this |
| Name successor advisors | Decide who recommends grants after you, so the fund outlasts you as intended |
| Invest for when you plan to grant | Money you will grant next year belongs in something steadier than money you will grant over a decade |
| Keep it moving | A fund that sits for years does nothing for the charities it was meant for |
Where this lands
A donor-advised fund lets a family take the deduction in the year it is worth the most, give appreciated stock instead of cash, and decide on the charities over time. It suits regular givers who itemize, families holding appreciated stock, and anyone with an unusually high-income year. It does not take IRA distributions to charity, and it cannot pay personal pledges. A private foundation offers more control and carries more work and lower deduction limits.
- A donor-advised fund gives you the deduction in the year you contribute and lets you recommend grants over the following years.
- Giving appreciated stock avoids the capital gain, and for shares held more than a year the deduction is the full market value.
- Grouping several years of giving into one contribution means the 2026 0.5%-of-income floor applies once.
- Cash is deductible up to 60% of adjusted gross income; appreciated stock up to 30%. Excess carries forward five years.
- Shares in a private business need to be given before the sale is legally committed.
- IRA distributions to charity cannot go into a donor-advised fund, and a grant cannot pay a personal pledge.
- Name who recommends grants after you, and keep the fund moving.
We open and manage donor-advised funds for clients.
Deciding what to give, and when, belongs inside the rest of the plan, and we work through it with you and your CPA.
Begin a conversation →Educational content only. This article is for informational and educational purposes and does not constitute personalized investment, tax, or legal advice, and does not create an advisory relationship. It does not recommend any gift, contribution, or charitable vehicle. Deduction limits and rules are summarized generally as of 2026; how they apply depends on individual circumstances, and further rules for donor-advised funds have been proposed but not finalized. Each sponsoring organization sets its own minimums, fees, investment options, and accepted assets. Contributions to a donor-advised fund are irrevocable. Confirm how any rule applies to you with your CPA or attorney before acting. The firm and its related persons may or may not hold any security, fund, or asset class mentioned, and any such position may change at any time. No return, outcome, projection, or performance is shown or implied anywhere in this article.
The firm may manage the investments held in a donor-advised fund for a client and charge its advisory fee on those assets. This is a conflict of interest, because the firm is paid more when assets are contributed to a fund it manages than when they are given directly to a charity.
TenBroeck Wealth Management, LLC is an investment adviser registered with the State of California (DFPI). Registration does not imply a certain level of skill or training. The firm does not provide tax preparation or legal services; tax and estate strategies are developed in coordination with your CPA and attorney, who confirm and implement tax filings and legal documents. The firm is affiliated through common ownership with TenBroeck Insurance Services, a licensed insurance agency; the firm or its representatives may receive commissions on insurance products implemented for clients — compensation separate from advisory fees that creates a conflict of interest. Clients are under no obligation to purchase insurance through the affiliate. This and other material conflicts are described in the firm's Form ADV Part 2A, available upon request.
Written by Schad TenBroeck, CFP®. CFP Board owns the marks CFP® and CERTIFIED FINANCIAL PLANNER® in the United States.
Look up the firm (CRD #304388) and Schad TenBroeck (CRD #7164172) on Investment Adviser Public Disclosure.