Individual donors gave an estimated $394.2 billion to U.S. charities in 2025, and roughly two-thirds of all American giving, according to Giving USA. Some of that generosity was carefully planned, but much of it happened the way it usually does: a flurry of year-end checks, written with love, but very little strategy.
I hear a version of the same question from clients often, usually after a business sale or an unusually strong compensation year: “I want to be more intentional about my giving. Should I set up a donor-advised fund or a charitable trust?”
Here’s the short answer. A donor-advised fund can be a simple, flexible, lower-cost way to organize your charitable giving, while a charitable trust can add an income stream or wealth transfer power in exchange for more cost and complexity. The right vehicle depends on what your gift should accomplish, and thinking beyond checkbook giving toward more strategic forms of charitable giving can benefit both you and the organizations you support.
Donor-Advised Fund vs. Charitable Trust: What’s the Difference?
Both donor-advised funds and charitable trusts have benefits for you and for the causes you care about. No matter which direction you choose, funding one of these vehicles is irrevocable; you can’t take the money back.
You should also name successors who can manage the money and direct donations if assets remain after you pass away: people who understand your philanthropic goals, your relationships with specific organizations, and how you approached making an impact.
Donor-Advised Fund (DAF)
A donor-advised fund is an inherently flexible vehicle. I like to think of a DAF as a charitable investment account you’ve already given away: easy to open, easy to add to, easy to grant from, but the money only moves in one direction. You can contribute at any time in any amount, recommend grants at any time in any amount, and face no mandatory annual distributions — a great fit whether you’re gifting annually or growing funds toward a large transformational gift down the road. The one non-negotiable: DAF funds can only be used for charity, and you cannot take them back for the benefit of an individual.
DAFs are also easy to set up and administer: no attorney to establish the fund, no annual tax returns to file (an important difference from charitable trusts), though you’ll likely pay an ongoing fee to the sponsoring organization.
You generally receive the tax deduction in the year you fund the DAF, even if grants come later. Timing that can be especially valuable in a high-income year, such as the year you sell a business or exercise stock options. Separating the timing of your tax benefit from the timing of your generosity is one of the tax strategies for high-income earners we return to often — no scrambling to write large checks before year-end.
Money in a DAF can be invested for long-term growth, and because DAFs are tax-exempt, there are no capital gains taxes on that growth, potentially increasing what you ultimately give. Funding one with appreciated stock adds another layer of tax benefit; we walk through that math, including how bunching gifts clears the new deduction floor, in our guide to donating stock to charity.
Consider a hypothetical scenario: you sell your business in 2026, and your adjusted gross income (AGI) lands at $2 million. You contribute $100,000 of stock you bought years ago for $40,000 to a DAF. Donating the shares instead of selling them avoids roughly $14,280 of federal tax on the $60,000 gain at 2026’s top 23.8% combined capital gains and net investment income rate. The new 0.5%-of-AGI floor absorbs the first $10,000 of your deduction, leaving $90,000 deductible — worth up to about $31,500 under 2026’s 35-cents-per-dollar cap for top-bracket itemizers. That can add up to roughly $45,000 of combined federal benefit on one $100,000 gift, while your grants flow to charities on your timeline. (These are 2026 figures, subject to change; your advisor should model your specific situation.)
Charitable Remainder Trust (CRT)
A Charitable Remainder Trust can be a great tool if you’re looking for both income for yourself and a benefit for charity: a tax-exempt, irrevocable trust that first distributes annual income to a named beneficiary for a specified period, then donates the remainder to a named charity.
When setting up a CRT, you’ll choose how long the income stream lasts: your lifetime, or a set number of years not to exceed 20. The trust must also pass IRS qualification tests, including a requirement that the projected remainder for charity equal at least 10% of the trust’s initial value, which is one reason CRTs tend to suit donors closer to, or already in, retirement.
A CRT has more administrative considerations than a DAF: legal fees to set up the trust, annual administration fees so it’s managed properly, and accountant fees to file its tax documents (Form 5227). You must also distribute at least 5% of the trust annually to the named beneficiary, and you cannot change that income beneficiary once the trust is established.
Your tax deduction will generally equal the present value of the remainder interest left to charity. CRTs can be especially beneficial in a higher interest rate environment, because a higher Section 7520 rate (the IRS rate used to value the income stream) can lead to a lower present value of payouts and a higher remainder interest — in other words, a larger deduction. The rate resets monthly and the math is subject to change.
There are many more nuances with CRTs, including the two primary types: charitable remainder annuity trusts (CRATs) and unitrusts (CRUTs). We cover the pros and cons of each in our full guide to charitable remainder trusts.
Charitable Lead Trust (CLT)
A Charitable Lead Trust is conceptually the inverse of a charitable remainder trust: an irrevocable trust that distributes annual income to a named charity for a set period, then transfers the remainder to a named beneficiary. That remainder can come back to the grantor (the person who contributed the assets) or go to a third party, typically the donor’s heirs — a structure that can achieve significant wealth transfer goals, since the beneficiary can potentially receive the remaining assets free of gift or estate taxes.
CLTs are largely an estate planning tool, and they don’t necessarily produce the largest charitable deduction. However, funding one with highly appreciating assets can be advantageous, since future appreciation is effectively removed from your estate. You may be able to take an upfront deduction equal to the present value of the payment stream to charity, depending on structure, though future income and gains in the trust will be taxable.
CLTs are often used by high-net-worth families who don’t need the current income from a particular asset, and like CRTs, they can take annuity or unitrust form (CLAT or CLUT).
Choosing Between a Donor-Advised Fund and a Charitable Trust
So how do you decide? The comparison below covers the considerations we walk through with clients most often.
 |
Donor-Advised Fund (DAF) | Charitable Remainder Trust (CRT) | Charitable Lead Trust (CLT) |
|---|---|---|---|
| Consider this when… | You want a turnkey option that only supports charity, with low costs and complexity and the potential to grow assets for charity tax-free over time | You want a customized trust that can generate an income stream for you now and pass the remainder to charity | You want a customized trust that can generate an income stream for charity now and pass the remainder to you or your heirs |
| Setup | No legal or accounting fees to set up, though you will likely pay an annual fee to the DAF administrator; start-up is immediate | Can be costly and complex to set up; you’ll likely need an attorney or tax professional, and start-up can take weeks or months | Can be costly and complex to set up; you’ll likely need an attorney or tax professional, and start-up can take weeks or months |
| Assets you can contribute | Cash, publicly traded securities, restricted stock, and certain complex assets such as privately held C-Corp and S-Corp shares, private equity, and hedge fund interests¹ | Cash, publicly traded securities, some types of closely held stock (not S-Corp stock), real estate, and certain other complex assets² | Cash, publicly traded securities, some types of closely held stock, real estate, and certain other complex assets² |
| Annual minimum distribution | No; there is no requirement to distribute DAF funds to charity in a given year | Yes: at least 5% of the trust must be distributed to the income beneficiary annually | No required minimum or maximum for charitable payments, so long as payments are made at least annually |
| Easy to change which charities receive grants | Yes | Generally not; charitable beneficiaries are named in the trust document | Generally not; charitable beneficiaries are named in the trust document |
| Ability to name successors | Yes | Yes | Yes |
| Donor control | Grant recommendations only, since DAF assets are technically administered by a sponsoring organization | Full control over grants per the trust terms | Full control over grants per the trust terms |
| Multiple contributions allowed | Yes | Sometimes: CRUTs permit repeated contributions; CRATs permit a single contribution | Depends on how the trust is structured |
| Tax deduction | Full fair market value is generally eligible, subject to 2026 AGI limits (60% cash / 30% appreciated assets), the 0.5% AGI floor and the 35% cap on deductions; subject to change | Partial, based on a calculation of the remainder interest projected to pass to charity | Potential partial deduction depending on structure, based on a calculation of the payment stream distributed to charity |
| Tax on investment income | No; growth inside the DAF is tax-free | The trust is tax-exempt, though income beneficiaries pay tax on the income stream they receive | Yes: CLTs are not tax-exempt; annual trust income is taxed to the grantor or the trust, depending on structure |
¹ Gifts of complex or illiquid assets (privately held business shares, commodities, REITs, and similar) may incur additional administrative fees. ² Assets may need to be sold so the trust can fund its required annual payments.
Want to go deeper? We unpacked exactly this on Off the Wall in “From DAFs to Charitable Trusts: Choosing the Right Path for Meaningful Philanthropy.” Watch the episode here.
We also covered creative ways to give, including complex assets, on Between Sips. Stream “Unique Ways to Donate to Charity Beyond Writing a Check” on Apple Podcasts or Spotify.
Common Questions About DAFs and Charitable Trusts
What are the pros and cons of a donor-advised fund vs. a charitable trust?
A DAF offers simplicity, lower costs, an immediate deduction, and tax-free growth, but assets can only go to charity and you recommend grants rather than direct them. A trust can pay income to you (CRT) or transfer wealth to heirs (CLT), but costs more, requires annual administration, and locks in key terms at signing.
How does a charitable remainder trust compare to a donor-advised fund?
A CRT pays you or a named beneficiary an income stream first, then gives the remainder to charity, with a partial deduction based on that projected remainder. A DAF works in one direction: the full gift is set aside for charity, with a deduction generally at full fair market value, subject to AGI and deduction limits.
When can a charitable lead trust make more sense than a donor-advised fund?
When wealth transfer is part of the goal. A CLT pays charity first and can pass the remainder, including future appreciation, to your heirs, potentially free of gift or estate taxes — something a DAF cannot do. It tends to fit donors giving appreciating assets they don’t need income from.
Can you use both a DAF and a charitable trust?
Yes, and many families do. A common pairing is a DAF for flexible annual giving alongside a CRT for an asset that needs to generate income.
Other Charitable Options
Of course, donating money isn’t the only way to make a meaningful impact — time and advocacy further a nonprofit’s mission too.
Serve on the Board
Board service is a significant time commitment, but it puts you in a position to create a lasting difference. You can work on big-picture initiatives, develop programs you personally connect with, and stretch yourself in the process — an incredible opportunity for high-performing professionals who enjoy working toward a meaningful goal.
Volunteer
Nonprofits often need specialized professional skills: event planning, grant review, leadership councils, or leveraging your network to find new donors. Contributing this way supports the organization beyond your wallet while connecting you with the people (or animals) the mission serves. For more ideas, listen to our conversation with Meera Pillai, a retired IT professional turned DC Metro community philanthropist.
What to Do Next
What is the legacy you want to leave behind? A $25,000 gift can be just as transformational as a $25 million gift, depending on the size of the organization, and what changes the outcome is whether the giving is designed with intention.
Start with your goals. Do you want income back from the assets you give? Are your heirs part of the plan? How much complexity are you willing to administer?
Then bring in the right team. Your attorney drafts any trust documents and your CPA handles the tax filings (Monument is neither a law firm nor an accounting firm), but connecting your giving strategy to your taxes, your estate, and your broader financial life is the heart of our philanthropy and charitable planning work.
If you’re weighing a donor-advised fund against a charitable trust, or wondering whether the answer is both, our complimentary Wealth Check is a no-pressure way to see how your charitable goals fit into your bigger financial picture. Ready to start the conversation? Let’s talk.
Note: Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. Please consult your CPA for tax advice.
Want to suggest a correction to this article? Email us at info@monumentwm.com. Please note that Monument Wealth Management and its advisors are not tax advisors, and this article is not a replacement for professional legal, accounting or tax advice.
