It is said that after his parents died, Saint Nicholas, the 4th century Christian bishop whose generous deeds gave rise to the legend of the modern Santa Claus, distributed his inheritance through secret gift-giving. According to one story, he once tossed bags of gold through a poor man’s window under cover of night so the man could pay dowries for his three daughters, ensuring them a better life.
Whether you know him as St. Nick, Sinterklaas, Kris Kringle, Father Christmas, or by any of his other names, Santa has become a model for gift-giving during the holiday season. And Americans follow in his generous footsteps.
According to GivingUSA.com, Americans donated a record of $592 billion to charity in 2024. Two-thirds of those donations were granted by individuals, with corporate donations amounting to less than 10% of all grants.
“The role of the individual donor cannot be overstated,” said Amir Pasic, Ph.D., the Eugene R. Tempel Dean of the Lilly Family School of Philanthropy at Indiana University. “Individuals were responsible for the largest share of all donations made last year and they continue to play a central role in our nation’s philanthropic sector.”*
Most charitable gifts are made directly through cash, check, or credit card. However, depending on a family’s charitable goals, there are more effective ways to give—methods that can also lead to greater tax savings.
Donor-advised funds
A donor-advised fund (DAF) is a charitable investment account designed for giving over time. Similar to a private foundation, but easier to set up and maintain, a DAF requires less time, fewer fees, and no legal team to administer.
A DAF is an agreement between a charitable administrator and a donor. The donor recommends how the charitable funds should be distributed and may also recommend how the account is invested. While the administrator has legal control, in practice they typically follow the donor’s wishes, ensuring both compliance with regulations and flexibility for the donor.
Key facts about donor-advised funds:
- Contributions are tax-deductible in the year they are made, provided the donor itemizes deductions.
- Cash donations are deductible up to 60% of adjusted gross income (AGI). Gifts of appreciated property, such as stock, are deductible up to 30% of AGI.
- The DAF administrator legally owns the funds and makes the final decisions on distributions.
- Donors can choose whether their grants identify them or remain anonymous.
Practical advantages
As CFP® professionals, we have found donor-advised funds to be an effective solution for several planning needs:
- Appreciated stock gifts: Instead of giving cash, clients donate appreciated stock to the DAF. They can then repurchase the same stock in their portfolio, establishing a new, higher cost basis.
- Long-term growth: Assets in a DAF can remain invested indefinitely. There is no annual grant requirement, so investments can grow to support larger gifts in the future.
- Business interests: Privately held business shares can be contributed prior to a sale. With charitable intent, a seller may reduce taxable gain on the transaction.
- Year-end flexibility: Donors who want a deduction but have not chosen a specific charity can contribute to their DAF by year-end. The grant to the charity can then be given later.
- Charity research support: Fund administrators often provide valuable insight on charities, including stewardship of donations and operating efficiency.
- Family engagement: DAFs can help families pass down values of generosity. For example, our team encourages families to meet and discuss which causes they care about. These conversations foster financial education, generosity, and shared purpose.
As you consider the gifts you’ll be making during this holiday season, you may want to make use of donor-advised funds, allowing your family to give strategically, save on taxes, and strengthen its charitable legacy.
Our team at Rea Wealth would be glad to guide you through the details and answer any questions you may have.
By Douglas Feller, CFA®, CFP®, CEPA®
Financial Advisor
Source: “Giving USA 2025: U.S. charitable giving grew to $592.50 billion in 2024, lifted by stock market gains” GivingUSA.com, June 24, 2005
This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation. Diversification does not assure a profit or protect against loss in declining markets and cannot guarantee that any objective or goal will be achieved. Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results.
Securities and advisory services offered through Commonwealth Financial Network®, member FINRA/SIPC, a Registered Investment Adviser. Additional advisory services offered by Rea Wealth Management, a Registered Investment Adviser, and fixed insurance products and services are separate and unrelated to Commonwealth.