Chris Gullotti is a member of the Board of Trustees for the Community Foundation for MetroWest.
It’s the time of year when many people think about making charitable donations. For many people who want current-year charitable tax benefits but aren’t sure which organizations they want to give to, a donor-advised fund (DAF) may be a suitable choice.
All DAFs are public charities. Donations offer the same charitable tax advantages as direct giving to nonprofit organizations. The main difference is that DAFs offer grantmaking benefits similar to those of private foundations.
Assets in a DAF account are invested to grow over time. Anyone can be given the authority to recommend grants to qualified nonprofit organizations. These recommendations must be approved by the DAF sponsor.
The tax benefits of DAFs
Giving to a DAF offers the same tax benefits as giving directly to any qualified charity.
- Cash gifts are deductible up to 60% of your adjusted gross income.*
- Appreciated assets like stock, real estate or private business interests may be deductible at their fair market value, up to 30% of your adjusted gross income.*
- Donors don’t need to pay capital gains taxes on appreciated assets that are sold by the DAF after donation.
The most well-known DAFs are “national” DAFs sponsored by banks, trust companies and mutual fund managers.
Another DAF option is available for those who want to focus some or all of their giving on local organizations: community foundations.
Focused on addressing nearby needs
A community foundation is a public charity whose mission is typically defined by a geography, such as a city or town or region, as opposed to a specific cause.
Community foundations also help individuals and families to define their philanthropic mission and giving objectives and match them with appropriate local organizations that can benefit most from their support.
Many community foundations offer a variety of charitable giving options, including DAFs.
The main differences between DAF sponsors
While national DAF accounts are structurally similar to those offered by community foundations, there are differences.
Administration and investment management
Investment management and administration of national DAF accounts are generally handled by the bank, trust company or mutual fund manager.
Community foundations generally outsource administration and investment management of DAF accounts to third-party investment managers and trust companies.
Investments
National DAFs generally invest in mutual funds and ETFs, using preset asset allocation models. Some mutual fund companies require some or all assets to be invested in their proprietary funds.
Community foundations often use third-party investment managers to manage the entire pool of invested assets. Each DAF account owns a “piece” of the investment pool. DAF accounts with larger balances may allow for more customized investment management.
Customized account management
Many national DAFs and some community foundations allow financial advisors to manage the assets in their clients’ DAF accounts.
Whether an advisor can manage these assets often depends on the account size. Many national and community foundation DAF sponsors only allow advisors to manage accounts with minimum balances ranging from $100,000 to $500,000.
Account minimums
In general, national DAF sponsors require much smaller investment minimums than community foundations. While most accounts can be funded with as little as $5,000, several sponsors allow accounts to be established with $0.
Account minimums for community foundation DAF accounts often start at $10,000.
Fees
Both national DAFs and community foundations charge fees. However, fees for community foundations are often higher. A portion of these fees are often used to help fund the community foundation’s operations.
All DAF fees are taken directly from donors’ accounts.
Philanthropic guidance
National DAFs are generally self-service vehicles. Donors research and choose the charities they would like to support on their own, with minimal assistance. (Some DAF sponsors do offer personalized guidance, but this is often only available for higher-balance accounts.)
Philanthropic advisors in community foundations enjoy working closely with individuals and families. They can help donors determine what they would like to achieve with their giving and recommend local or regional charities that align with their interests.
Many community foundations help donors find volunteer and board membership opportunities with local charities.
Which is right for you?
Your choice of DAF sponsor doesn’t limit the kinds of qualified nonprofits you can support. With a few exceptions, your DAF account with either a national sponsor or community foundations can make donations to local, national and international charities. So why would you choose one sponsor over the other?
- National DAFs may be better if you know which nonprofit organizations you want to support and feel comfortable researching and vetting potential charitable candidates on your own.
- Community foundations may be more suitable if you want more personalized help and expertise in addressing the needs of nonprofits in your region than you might get from a national DAF sponsor.
You don’t have to choose one or the other. Some people establish separate DAFs with both kinds of sponsors.
If you have any questions about DAFs in general or need help determining which option(s) are right for you, consider speaking with a financial advisor.
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This article was authored by Chris Gullotti and Jeffrey Briskin. Chris is a financial advisor and Partner with Canby Financial Advisors, LLC, an Investment Adviser registered with the U.S. Securities & Exchange Commission. SEC registration does not constitute an endorsement by the SEC nor a statement about any skill or ability. Chris can be reached at 508.598.1082 or cgullotti@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.
©2026 Canby Financial Advisors, LLC.
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*These tax benefits are only available if you itemize deductions.