“The master commended the dishonest manager because he had acted shrewdly. For the people of this world are more shrewd in dealing with their own kind than are the people of the light. I tell you, use worldly wealth to gain friends for yourselves, so that when it is gone, you will be welcomed into eternal dwellings.”
— Luke 16:8-9 (NIV)
The Lord calls us to be wise and intentional in how we manage the resources He entrusts to us. In doing so, we exchange what is temporary for what is eternal. Missionary Jim Elliott said it best: “He is no fool who gives what he cannot keep to gain what he cannot lose.”
One of the most effective and flexible ways to live this out today is through a Donor Advised Fund (DAF).
What Is a Donor Advised Fund?
According to the IRS (2025 definition), a DAF is: “A separately identified fund or account that is maintained and operated by a section 501(c)(3) organization (the sponsoring organization). Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it; however, the donor, or the donor’s representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account.”
In other words, a DAF allows you to:
- Make an irrevocable charitable contribution to a sponsoring organization.
- Receive an immediate tax deduction.
- Recommend grants to IRS-qualified charities over time.
Advantages of a DAF
- Ease of Setup
- Often established in less than 48 hours with minimal paperwork.
- Many sponsoring organizations have no startup costs and accept starting balances as low as $5,000.
- No Ongoing Minimum Balance
- After funding, there’s typically no requirement to maintain a specific balance.
- Custom Naming & Timing
- You can name the fund (e.g., “The Smith Family Giving Fund”) and recommend grants at your own pace.
- Anonymity
- Grants can be made in the fund’s name rather than your personal name.
- Tax Benefits(2025 IRS rules)
- Deduct cash contributions up to 60% of AGI.
- Deduct appreciated assets up to 30% of AGI (with a 5-year carryforward for unused amounts).
- Avoid capital gains tax on donated appreciated assets.
- No excise tax requirements like those applied to private foundations.
- Investment Growth
- Many sponsors allow you to invest contributions so they can grow tax-free for future giving.
Limitations of a DAF
- Irrevocable Giving – Once contributed, funds cannot be taken back.
- Sponsor Control – The sponsoring organization has final legal authority over all grants.
- Fees – Administrative and investment fees apply, though typically less than private foundations.
- Minimum Contribution Amounts – Most sponsors require at least $1,000 per contribution.
Important 2025 Regulatory Updates
- Increased IRS Scrutiny
- The IRS is monitoring DAFs to prevent abuses such as indefinite holding of funds or personal benefit from advisors. Proposed rules include tighter definitions of “donor adviser” and prohibitions on paying personal investment advisors with DAF funds.
- Fee Transparency
- With over $230 billion in DAF assets nationwide, there’s a push for clearer disclosure of fees by sponsoring organizations.
- Upcoming 2026 Tax Changes
- A 0.5% AGI floor: only the portion of charitable contributions above this threshold will be deductible.
- A 35% cap on the tax value of charitable deductions for high-income taxpayers.
- A new universal charitable deduction ($1,000 single / $2,000 married) for non-itemizers — but DAF contributions will not qualify for this deduction.
- Planning tip: Donors may wish to accelerate contributions into 2025 to maximize current benefits.
How to Set Up a DAF
- Choose a Sponsoring Organization
- Examples include: Fidelity Charitable, Schwab Charitable, Vanguard Charitable, National Philanthropic Trust, local community foundations, and faith-based foundations.
- Compare Fees, Minimums, and Investment Options
- Look for alignment with your giving priorities and cost expectations.
- Fund the Account
- Use cash, appreciated securities, or other non-cash assets.
- Begin Recommending Grants
- Support IRS-qualified charities immediately or over time.
Leaving a Legacy
Winston Churchill once said: “We make a living by what we get, we make a life by what we give.”
A Donor Advised Fund is more than a financial tool — it’s a spiritual investment strategy. It can rally your family, small group, or church toward generous living. And it keeps generosity front and center in your life’s mission.
When you give this way, you are not just making charitable donations — you are stewarding God’s resources for eternal purposes. Be shrewd. Be intentional. And let your giving echo into eternity.