Helping clients up the impact of their charitable giving with a DAF

For many consumers, this is the time of the year for charitable giving. Julie Sunwoo, president of DAFgiving360, recently shared some insights on how advisors can help their clients use a donor-advised fund (DAF) to become more strategic about their giving decisions.

As explained by Sunwoo, a donor-advised fund is a simple, flexible, and tax-smart solution for charitable giving. Once a DAF account is opened, donors can contribute cash, securities, or appreciated assets, and they will be eligible for a current-year tax deduction. “Then,” Sunwoo explained, “donors and their families can recommend grants to eligible charities of their choice quickly and easily at any time to support both immediate and long-term charitable goals.”

Why DAFs are becoming more popular

DAFs have been growing in popularity because they are easy to use, provide an efficient way to give to charity, and they can help donors be more strategic about their giving decisions, Sunwoo pointed out.

They allow donors to set aside funds for charitable use today, then give over time as needs arise — and many involve their families in the process, helping reinforce shared giving values across generations. While charitable dollars are in a donor-advised fund account, donors can invest the funds in alignment with their goals and values, often working with an advisor to do so.

Investment appreciation in a DAF account is tax-free, which means more money for charity. “As more advisors incorporate philanthropy into holistic financial planning, DAFs have become a preferred vehicle for donors who want their giving to be both efficient and impactful,” Sunwoo said.

 Maximize charitable giving at year-end

For many donors, the end of the year is a time for generosity and reflection on how to make a greater impact with their giving, Sunwoo said. “A DAF is a great tool to use throughout the year but can also be used to maximize charitable impact at year-end,” she said. “A DAF allows clients to make contributions by December 31, including appreciated securities or other non-cash assets, to secure an annual tax deduction, while maintaining the flexibility to recommend grants to charities at any time.”

Advisors can help clients identify which assets may offer the greatest tax advantage, including appreciated securities or even an unneeded permanent life insurance policy, which can be contributed to a donor-advised fund, Sunwoo said. “Donating appreciated assets can allow donors to eliminate the capital gains tax they would otherwise incur by selling those assets. They can, in turn, give the full value of the asset to charity – resulting in as much as 20% more for charitable goals,” she added.

Sunwoo explained that life insurance is unique in that it’s considered an ordinary income asset. This means that surrendering a policy for its cash value would trigger ordinary income taxes for a donor on the policy’s appreciation.

But, as she pointed out, “by contributing the policy directly to charity, a donor potentially avoids the tax they would otherwise incur if they surrendered the policy and donated the proceeds. And because U.S. public charities are tax-exempt, the charity can surrender the policy for its full, untaxed value, maximizing the impact of the contribution.”

Advisors can also ensure that charitable planning is coordinated with broader wealth and tax-planning strategies, especially as clients prepare for potential tax-law changes in 2026, Sunwoo added.

Bringing charitable giving into a financial plan

In addition, advisors can use DAFs to bring charitable giving into the heart of a client’s financial plan by aligning tax efficiency, long-term goals, and personal purpose, Sunwoo added.  “A DAF allows clients to make contributions when it is most advantageous financially and receive the corresponding tax benefits upfront, while maintaining the ability to support charities on their own timeline. Advisors can help clients identify the most tax-efficient assets to contribute and integrate philanthropy into the broader framework of estate planning, legacy intentions, and values-driven investment choices,” she added.

In addition, assets in a DAF account can be invested for tax-free growth, allowing advisors to tailor investment strategies that reflect a client’s values and potentially amplify the long-term dollars available for charity.

“This combination of flexibility, tax advantages, and strategic planning makes DAFs a uniquely powerful tool for clients who want their giving to be thoughtful, deliberate, and fully integrated into their broader financial lives, “she said.

Conversations to have with your clients

The end of the year – often referred to as “Giving Season” – is a natural time for advisors to revisit a client’s charitable goals, Sunwoo said. “These conversations often go beyond tax planning and open the door to meaningful dialogue about legacy, purpose, and the causes that matter most to a family. Many advisors are finding that bringing spouses, children, or even grandchildren into the conversation helps strengthen multi-generational relationships and reinforces shared philanthropic values,” she added.

Advisors can also walk clients through strategies such as contributing appreciated assets, timing gifts in light of upcoming tax-law changes or using a DAF to simplify giving and create a long-term charitable plan. “These conversations help advisors deepen trust while helping clients align their finances with their values,” Sunwoo added.

Philanthropy: What to expect in 2026

“We’ve seen incredible generosity from our donors throughout 2025,” said Sunwoo, as she described the state of philanthropy this year.  In just the third quarter, DAFgiving360 donors granted more than $2 billion to charity through more than 300,000 grants, she added. More than 76,000 charities received grants from DAFgiving360 donors in Q3 2025, a 17% increase over Q3 2024.”

And so far, Sunwoo added, year to date through the third quarter, more than $6 billion has been granted to charity, an increase of 24% over the first three quarters in 2024. Donors are also responding to the environment — including strong markets and potential tax changes in 2026 — by being more intentional about the timing and structure of their charitable contributions, Sunwoo added.

“As advisors look to 2026, they should anticipate continued interest in tax-smart giving strategies, guidance on how to navigate the upcoming tax-law changes, and increased opportunities to help clients integrate philanthropy into long-term planning,” according to Sunwoo.

Clients will also be looking for ways to involve their families in giving, make values-aligned decisions, and use tools like DAFs to support charities over time. “Overall,” Sunwoo said, “the giving environment remains very strong, and advisors will play an increasingly important role in helping clients make informed, strategic, and meaningful philanthropic decisions.”

 

© Entire contents copyright 2025 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.