Donor-Advised Fund (DAF)
A charitable account you fund now for an immediate deduction — often with appreciated stock — then grant to charities on your own timeline.
Contributing appreciated assets to a DAF gives you a deduction today, avoids capital-gains tax on the gift, and lets you recommend grants to charities on your own schedule. “Bunching” several years of giving into one high-income year can clear the standard deduction and maximize the benefit. It's the workhorse of tax-aware generosity for high earners.
Deduction now, granting later
A donor-advised fund is a charitable account you contribute to today — taking an immediate tax deduction — then recommend grants from to your chosen charities over time. The money is irrevocably committed to charity once it's in, but you control the timing and destination of the gifts, and the account can be invested for tax-free growth while it waits to be granted out.
Appreciated assets and bunching
Two moves make a DAF especially powerful. First, fund it with appreciated long-term securities instead of cash: you deduct the full fair-market value and avoid the capital-gains tax you'd owe if you sold. Second, “bunch” several years of giving into one high-income year to clear the standard deduction and itemize — then grant to charities gradually in the years that follow. It's the workhorse of tax-aware generosity for high earners.
How Formation handles it
Formation surfaces your low-basis, highly appreciated positions — the ideal funding source for a DAF — and folds charitable planning into the same view as your income and tax picture, so a bunching year is something you plan rather than discover. The contribution and grant decisions stay yours to make with your advisor.
A worked example
You normally give $25,000 a year to charity. In a high-income year you instead contribute $125,000 of appreciated stock to a DAF: you deduct the full value, skip capital-gains tax on the embedded gain, clear the standard deduction by itemizing, and still grant $25,000 a year to your charities for the next five years.
Frequently asked
What are the tax benefits of a donor-advised fund?
You get an immediate deduction in the year you contribute, you avoid capital-gains tax when you fund it with appreciated assets, and the account grows tax-free until granted. Bunching contributions into one year can also let you itemize when you otherwise couldn't.
Can I donate appreciated stock to a DAF?
Yes — and it's often the most efficient way to fund one. Donating long-term appreciated securities lets you deduct their full fair-market value and avoid the capital-gains tax you'd owe on a sale, so more goes to charity and less to tax.
In Formation
Charitable planning
See this in your own numbers.
Formation organizes your whole household by entity and cites every figure to its source — the context that makes terms like this actionable.
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