Strategic Charitable Giving: Expanding Role of Donor-Advised Funds in U.S. Financial Planning

Donor-advised funds (DAFs) have become an increasingly popular financial tool for strategic charitable giving in the United States, offering tax-efficient and flexible options for donors. These funds allow donors to contribute cash, securities, or appreciated assets to a DAF account, receive immediate tax deductions, and recommend grants to charities at any time, supporting both immediate and long-term philanthropic goals. The ability to invest charitable funds within the DAF for tax-free growth enhances the potential impact of donations by increasing the resources available for charitable giving over time. Financial advisors play a critical role in guiding clients through the complexities of charitable planning using DAFs. They assist clients in identifying assets that offer significant tax advantages when donated, such as appreciated securities or permanent life insurance policies, which can be directly contributed to avoid capital gains or ordinary income taxes. This strategic approach allows donors to maximize the financial benefit to charities and optimize their overall wealth and tax planning strategies. With anticipated tax law changes in 2026, advisors are increasingly helping clients integrate philanthropy into their comprehensive financial plans. This includes aligning charitable giving with estate planning, legacy intentions, and values-based investment strategies. The flexibility of DAFs enables donors to make contributions when most advantageous tax-wise, while maintaining the freedom to distribute funds to charities on their own schedule. Year-end giving season often serves as a pivotal moment for advisors to engage clients in multi-generational philanthropic conversations, reinforcing family values and legacy through joint charitable initiatives. The use of DAFs facilitates these meaningful discussions and supports ongoing, planned giving. Recent data from DAFgiving360 indicates robust philanthropic activity, with over $6 billion granted to charity through donor-advised funds in the first three quarters of 2025, marking a 24% increase year-over-year. This surge reflects donors' strategic responses to strong markets and impending tax changes, emphasizing the importance of tax-smart, intentional giving. Looking ahead, advisors should anticipate sustained demand for guidance on charitable giving strategies that are tax-efficient and integrated with broader wealth management goals. By leveraging tools like DAFs, advisors can help clients deliver impactful, values-aligned philanthropy while navigating evolving regulatory landscapes and personal financial objectives.