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What is a donor-advised fund (DAF)?

A donor-advised fund (DAF) is a charitable giving account. You contribute cash or investments to it, then recommend grants to the charities you choose over time. Contributions are irrevocable, and you may be eligible for an income tax deduction in the year your DAF receives them.

How a DAF works

  1. Contribute. Give cash, stock or ETFs to your DAF. On Frec, you can donate appreciated stock from your direct index or self-managed holdings.
  2. Take the deduction. Your contribution counts for the tax year your DAF receives it. Your DAF sponsor sends you a receipt.
  3. Invest while you decide. Your DAF balance can stay invested and grow tax-free until you grant it.
  4. Recommend grants. Choose which eligible charities to support, this month or years from now.

Why donate stock instead of cash?

When you donate shares you've held for more than a year, you don't pay capital gains tax on their growth, and you can generally deduct their full market value. Many charities aren’t set up to accept stock directly. A DAF accepts the stock and turns it into grants the charities can use.

Example. You own $10,000 of stock you bought for $4,000. If you sell it and donate the cash, you could owe roughly $1,128 in federal tax on the $6,000 gain (15% plus the 3.8% net investment income tax). If you donate the shares to your DAF instead, the full $10,000 goes to your giving.

Keep in mind

  • Contributions are irrevocable. Once your shares reach your DAF, they belong to your DAF provider and can’t be returned.
  • Grants go to eligible public charities. They can’t go to individuals or political campaigns, or pay for anything you receive in return, like event tickets or tuition.
  • Deduction limits apply. See Understanding 2026 AGI limits for charitable deductions.
  • Frec donates only long-term shares. Shares held a year or less are generally deductible only at what you paid or their market value, whichever is lower, so Frec donates only lots held more than a year.

For a deeper look at DAFs, including bunching and the 2026 tax changes, read The investor's guide to donor-advised funds.