Recently, Bloomberg Law Daily Tax Report® stated that U.S. charities will receive $5.7 billion less in charitable contributions annually under the new tax regime.[1] By contrast, U.S. Donor Advised Funds (“DAFs”) hold $251.52 billion in assets.[2] DAF donors who don’t name a successor advisor to their DAF leave their DAF in the hands of the financial custodian for distribution.
Contributions to DAFs are tax deductible in the year made. DAFs are useful for bunching charitable deductions, avoiding capital gains tax on appreciated assets contributed to the DAF, and inspiring philanthropy among family members. These are generally seen as more economical than creating a private foundation with family wealth. However, DAFs only benefit charities if the money is distributed from the DAF to the charity.
An important tool in charitable giving and solicitation is the individual IRA account. Charities benefit from 100% of the value of an IRA death benefit, while friends and family members receive IRA proceeds only after taxes. Additionally, individuals over the age of 70½ can make Qualified Charitable Contributions (“QCDs”) from their IRAs. When an IRA custodian is directed to send a QCD to a qualified charity, the distribution counts as a Required Minimum Distribution (“RMD”), but it does not count as income.
QCDs are a great source of untapped donations for charities. Clients over the age of 70½ may consider using their IRAs as a source for charitable contributions rather than funding their DAFs. While DAFs can be funded with appreciated property and avoid capital gains, they are often funded with after‑tax dollars. IRAs are 100% taxable to an individual recipient, whether the IRA owner or the beneficiary. Individuals may consider preserving their cash or the appreciated stock that will receive a basis step up at death for individual estate beneficiaries and use IRAs for lifetime and post-death charitable giving.
Recently, bills were introduced in both the House and Senate that would allow QCDs to be made to DAFs.[3] At present, DAFs are excluded from eligible qualified charitable recipients. This proposed legislation does not alleviate the revenue downturn faced by U.S. charitable organizations. Nevertheless, nonprofit organizations can specifically appeal to DAF owners and the over 70½ demographic by highlighting QCDs and IRA beneficiary designations as tax‑efficient ways to support charitable missions during life and at death.
Leech Tishman’s Trusts & Estates team has extensive experience in drafting complex, customized estate planning documents that contain charitable contributions. Our team is prepared to advise corporations, tax-exempt organizations, and non-profit organizations on how to maximize charitable donations and best utilize donor-advised funds. For assistance of additional information, please contact Trusts & Estates Partner Elisabeth St.B McCarthy at emccarthy@leechtishman.com.
[1] Bloomberg Law Daily Tax Report® (Mar. 17, 2026).
[2] National Philanthropic Trust®, The 2025 DAF Report (2025).
[3] H.R. 2891, 119th Cong. (2025); S. 3975, 119th Cong. (2025).