How donor-advised funds work, their tax benefits, and how Christians use them to give strategically.
Generosity has always been central to the Christian life. From the earliest days of the church, believers have sought ways to steward their resources faithfully and invest in God’s work around the world.
But many donors today face a new question:
How can I give more strategically?
Financial tools have become more complex. Many donors hold assets like appreciated stock, business interests, or real estate. Tax laws change regularly. And families often want to give thoughtfully over time rather than making one-time gifts.
One tool that has become increasingly popular among generous families is the donor-advised fund.
A donor-advised fund (DAF) is a charitable giving account that allows donors to contribute assets, receive an immediate tax deduction, and recommend grants to charities over time. Donor-advised funds simplify charitable giving and are often used for tax-efficient donations of assets like stock, cash, or real estate.
But many people still ask:
What exactly is a donor-advised fund?
How does it work? And why are so many Christian families using them for charitable giving?
This guide will walk through everything you need to know.
Table of Contents
What Is a Donor Advised Fund?
A donor-advised fund (DAF) is a charitable giving account that allows individuals or families to contribute assets, receive an immediate tax deduction, and recommend grants to charities over time.
Think of it as a charitable investment account dedicated to generosity.
Instead of giving directly to a nonprofit each time you make a gift, you contribute assets into your donor-advised fund. From there, you can recommend grants to support the ministries and organizations you care about.
Donor-advised funds have become one of the fastest-growing tools in philanthropy because they combine:
- simplicity
- tax efficiency
- long-term giving flexibility
For many families, they provide a practical way to align financial stewardship with their desire to give generously.
How Do Donor Advised Funds Work for Charitable Giving?
The process of using a donor-advised fund is surprisingly straightforward.
Step 1: Contribute assets to your donor-advised fund
You can contribute many types of assets, including:
- cash
- appreciated stock
- mutual funds
- business interests
- real estate
- other non-cash assets
Once the contribution is made, those assets become part of your charitable fund.
At that point, you typically receive a charitable tax deduction for the full value of the contribution.
Step 2: The assets can be invested and grow tax-free
Inside the donor-advised fund, assets can be invested and potentially grow over time.
Because the funds are already dedicated to charity, any growth in the account can be used for future grants to support ministries and nonprofits.
This allows families to build a long-term giving strategy rather than making one-time gifts.
Step 3: Recommend grants to charities
From your donor-advised fund, you can recommend grants to qualified nonprofit organizations whenever you choose.
For example, many donors support:
- churches
- missionary work
- campus ministries
- humanitarian relief
- Christian nonprofits
- education initiatives
Instead of making separate gifts each time, your donor-advised fund becomes the central hub for your charitable giving.
Why Do Donors Use Donor-Advised Funds?
Donor-advised funds have grown rapidly in popularity because they offer several key benefits.
Simplicity
A donor-advised fund simplifies the administrative side of charitable giving.
Instead of managing multiple donations, receipts, and records, everything can be organized through a single charitable account.
Flexibility in Giving
You can contribute assets in one year and distribute grants over many years.
This flexibility allows donors to give thoughtfully rather than feeling pressured to make quick decisions about where funds should go.
Strategic Stewardship
For many Christian donors, stewardship involves more than generosity. It also includes wisdom in how resources are deployed for kingdom impact.
A donor-advised fund can help families approach giving more strategically by creating a structure for long-term generosity.
Tax Benefits of Donor-Advised Funds
One of the reasons donor-advised funds are so widely used is their potential tax advantages.
While tax situations vary for each donor, some common benefits include:
Donor-Advised Fund Tax Deduction
When you contribute assets to your donor-advised fund, you may receive a charitable tax deduction in that year.
This can be particularly helpful during high-income years or major financial events.
Avoiding Capital Gains on Appreciated Assets
Many donors contribute appreciated stock or other assets instead of cash.
By donating appreciated assets directly to charity through a donor-advised fund, donors can often avoid capital gains taxes that would otherwise apply if the asset were sold first.
Strategic Year-End Giving
Donor-advised funds are frequently used for year-end charitable planning.
For example, a donor might contribute assets before December 31 to receive a tax deduction that year, while distributing grants to ministries over the following months or years.
Donating Stock and Other Non-Cash Assets
Many generous families hold a significant portion of their wealth in assets rather than cash.
Examples include:
- appreciated stock
- business interests
- real estate
- investment portfolios
Donating these assets directly through a donor-advised fund can often be significantly more tax-efficient than selling the asset and donating cash.
For this reason, donor-advised funds have become one of the most common vehicles for non-cash charitable giving.
Why Many Christian Families Use Donor-Advised Funds
Beyond the financial advantages, many Christian donors are drawn to donor-advised funds for another reason: they support intentional stewardship.
Scripture consistently teaches that everything we have ultimately belongs to God.
“Each of you should give what you have decided in your heart to give, not reluctantly or under compulsion.”
— 2 Corinthians 9:7
For many families, a donor-advised fund provides a practical structure for living out that calling.
It allows them to:
- plan generosity intentionally
- involve family members in giving decisions
- support ministries consistently
- steward resources wisely over time
Rather than replacing generosity, donor-advised funds can actually help donors give more thoughtfully and more strategically.
Donor-Advised Fund vs Private Foundation
Some families also consider establishing a private foundation for charitable giving.
While private foundations can be effective for very large philanthropic initiatives, they typically require:
- more administrative oversight
- legal filings and compliance
- higher setup and operating costs
For many donors, a donor-advised fund offers a much simpler alternative that still allows for meaningful and strategic generosity.
Why Many Donors Partner with Cru Foundation
Cru Foundation helps donors give strategically to support gospel-centered ministry around the world.
Through a donor-advised fund with Cru Foundation, donors can:
- support ministries advancing the gospel
- give appreciated assets
- simplify charitable planning
- steward resources with a kingdom perspective
Our team works closely with donors and their advisors to help structure gifts in ways that maximize both generosity and impact.
Frequently Asked Questions About Donor-Advised Funds
What is a donor-advised fund in simple terms?
A donor-advised fund is a charitable account that allows you to contribute assets, receive an immediate tax deduction, and recommend grants to charities over time.
Are donor-advised funds tax deductible?
Yes. Contributions to donor-advised funds are typically eligible for charitable tax deductions, although specific tax outcomes depend on individual circumstances.
Can you donate stock to a donor-advised fund?
Yes. Many donors contribute appreciated stock or other assets to donor-advised funds because it can be a tax-efficient way to give.
How do donor-advised funds benefit charities?
Donor-advised funds help donors organize their giving and often encourage larger or more strategic charitable contributions over time.
Can families use donor-advised funds together?
Yes. Many families use donor-advised funds as a way to involve multiple generations in charitable decision-making and to build a shared legacy of generosity.
Explore Strategic Giving with Cru Foundation
If you are exploring ways to give more strategically, a donor-advised fund may be a helpful tool.
You can learn more about how donor-advised funds work through Cru Foundation here:
Learn more about Donor-Advised Funds →
If you would like to talk through your situation or explore whether a donor-advised fund could support your giving goals, our team would be glad to help.
You can start a conversation with one of our giving specialists by calling:
1-800-449-4917
We would be honored to help you steward the resources God has entrusted to you for lasting kingdom impact.