Giving & PhilanthropyIntermediate6 min read

Donor-advised funds: a practical guide

A deeper walkthrough of setting up, funding, and granting from a DAF.

We covered donor-advised funds briefly in the Advanced category. Here's a more practical walkthrough for someone actually ready to open one.

Where to open one

Fidelity Charitable: $0 minimum to open, 0.6% annual fee on the first $500k. Widely considered the easiest entry point.
Schwab Charitable: similar structure, slightly different fee tiers.
Vanguard Charitable: $25,000 minimum (higher than others), lower long-term fees — favored for larger DAFs.
Local community foundations: may offer more customized grantmaking and local impact, sometimes with higher fees.

How to fund it

You contribute cash, appreciated securities, or sometimes more complex assets (real estate, private business interests). For most people, the appreciated-securities path is the most valuable — you get a deduction for the full market value and avoid capital gains. Once the assets are in the DAF, they're irrevocably committed to charity. You can invest the balance in any of several model portfolios until you grant it.

Granting from it

At any time, you can recommend grants from your DAF to any qualified 501(c)(3) charity. There's no annual minimum granting requirement (unlike a private foundation), so you can let the money grow tax-free until you find the right cause. Grants are usually processed within a few business days and can be anonymous if you prefer.

DAFs have fair critics

Some philanthropy experts argue DAFs can let donors take the tax benefit now but delay actual charitable impact for years or decades. That's a legitimate concern. The right discipline is to grant at least as much each year as you contribute, so the DAF is a pass-through and not a holding pen. Set yourself a personal rule and follow it.

Put this into practice

Worth tracks your accounts, budgets, and goals — so the concepts in this article aren't just theory.

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