By SFMG Wealth Advisors

For donors who give consistently or have a more complex financial picture, a donor advised fund offers a meaningfully better approach than traditional annual giving. Most donors give the same way every year: checks in December, a receipt at tax time, repeat. That works. But a DAF separates the funding decision from the granting decision, giving you tax benefits today while deciding where to give tomorrow, on your own terms and timeline.

The Charitable Giving Opportunity

A DAF is a charitable account held at a sponsoring organization, a national provider like Fidelity Charitable or Schwab Charitable, or a local community foundation. You contribute assets, receive your tax deduction in that year, and then recommend grants to qualified nonprofits on any timeline. The sponsoring organization handles the administration. You decide where and when the grants go.

How it works is straightforward: contribute cash, appreciated stock, or other assets in a high-income year and take the deduction immediately. Assets inside the account can be invested and grow tax-free. Recommend gifts to any qualified 501(c)(3) at any pace, there is no annual payout requirement and no minimum distribution.

Key Benefits Worth Knowing

Tax deduction timing and the 2026 rule change.

Under the One Big Beautiful Bill Act (OBBA), effective January 1, 2026, itemized charitable deductions are now subject to a 0.5% of AGI floor based on current tax law. In plain terms: only the portion of your contributions that exceeds 0.5% of your adjusted gross income is deductible. A donor with $300,000 in AGI, for example, cannot deduct the first $1,500 of charitable giving. DAFs remain a strong planning tool, especially in high-income years or when bunching charitable gifts to clear the floor, but the math is worth running before acting.

Sources: Bipartisan Policy Center · Kiplinger · Thomson Reuters Tax & Accounting

Donate appreciated stock, skip the capital gains.

Transferring appreciated shares directly into the DAF eliminates capital gains tax on the growth entirely, while still allowing a deduction at full fair market value. Selling first and donating the proceeds means the gains are taxed before anything reaches the charity, a significant and often overlooked difference.

One receipt covers all your giving.

For donors supporting multiple organizations, a DAF simplifies recordkeeping considerably. One contribution, one acknowledgment letter, regardless of how many grants go out over the year.

Family giving and legacy planning.

DAFs can be named and passed to the next generation. Many families use them to make giving decisions together over time, and the account becomes part of a broader estate and legacy conversation.

Simpler than a foundation or charitable trust.

A private foundation requires legal fees, annual filings, dedicated administration, and mandatory distributions. A DAF provides most of the same flexibility without that overhead.

Who Should Consider This?

More people than typically think about it. The major national providers have dropped their account minimums entirely, so this is no longer just a tool for large donors. It tends to make the most sense in specific situations: a high-income year from a business sale, bonus, or inheritance where capturing a larger deduction now is worthwhile; a portfolio with appreciated positions that were earmarked for charity anyway; or a desire to simplify giving to multiple organizations without tracking down separate acknowledgment letters.

Putting Your Giving to Work Locally

At SFMG, giving back is something we do because it matters, not because it benefits the firm. Our team volunteers hundreds of hours each year and serves on nonprofit boards across the Dallas area, supporting organizations that create real opportunity for real people. A DAF is one of the most practical tools for sustaining that kind of commitment over time. Through our involvement with organizations like the Hendrick Scholarship Foundation, which helps Plano ISD graduates overcome hardship and complete their education; the North Texas Food Bank, which works to end hunger across the region; Communities Foundation of Texas, which channels philanthropic resources into some of the most pressing local needs; Elevate North Texas, which equips young people with the skills and mentorship to build meaningful careers; and Genesis Women’s Shelter & Support, which provides safety and healing for survivors of domestic violence, we’ve seen firsthand how consistent, sustained funding changes outcomes. A donor advised fund makes it easier to support all of these organizations on a thoughtful, multi-year basis: contribute when it’s financially advantageous, invest the assets to grow them over time, and grant to the causes you care about without the year-end scramble. All of the organizations above are fully qualified 501(c)(3)s and eligible recipients of DAF grants.

About SFMG Wealth Advisors

At SFMG Wealth Advisors, we are not just your wealth advisors. We are the team that gets invited to your retirement parties, the ones you call when a big life change is on the horizon, and the familiar faces you trust to help navigate whatever comes next. Founded in 2002 and locally owned, we are a Dallas-based, fee-only Registered Investment Advisor serving high-net-worth families, business owners, executives, and private equity investors. As fiduciaries, we are required to act in our clients’ best interest, and our mission is simple: to help provide you with Confidence for Life. To learn more about charitable giving strategies and how we help clients build giving plans aligned with their values, please visit sfmg.com or call us at 3960 Dallas Parkway, Suite 400, Plano, TX 75093.

Disclosure

This article was prepared by SFMG Wealth Advisors for general educational purposes and reflects information believed to be current as of the date of publication. Tax laws and interpretations may change. Before acting on any charitable planning strategy, please consult your tax and/or legal advisor regarding your specific situation. SFMG Wealth Advisors does not provide tax or legal advice.

This material is not intended as, and should not be construed as, individualized investment, tax, or legal advice. SFMG Wealth Advisors is an SEC-registered investment adviser. SEC registration does not imply a certain level of skill or training. Investing involves risk, including the possible loss of principal.

SFMG Wealth Advisors does not receive compensation, referral fees, or other remuneration from the charitable organizations mentioned in this article. SFMG and/or certain SFMG personnel may have relationships with one or more of these organizations, including volunteer or board service, and in some cases providing services on a pro bono basis. These outside activities are reviewed and disclosed through our firm’s outside business activity process. From time to time, SFMG may assist clients with the administrative process of making charitable gifts, including gifts to some organizations referenced here. This article is not a recommendation, endorsement, or solicitation to support any specific organization. The organizations mentioned are represented to be qualified under Section 501(c)(3) and eligible to receive donor-advised fund (DAF) grants. A copy of SFMG Wealth Advisors’ Form ADV Part 2A is available upon request or at www.sfmg.com/resources.