Gifting cash, stocks, and gently used items are common methods of contributing to charities. Sometimes, however, one may wish to amass funds to donate a larger amount to a charity in the future for a particular goal, rather than a little at a time. An easy way to achieve that goal without having to choose the charity at the time of donation is to use a donor advised fund.

A donor advised fund, sometimes referred to as a DAF, is a vehicle used to make charitable contributions to a general fund without the requirement to make the grants to a specific charity immediately. The main benefit is that the donor receives an immediate tax benefit at the time the gift is made. At its most basic, it is a charitable investment account into which deductible contributions are made and out of which “grants” or distributions are made at a later time to one or multiple charitable organizations.

Donor advised funds are much easier to set up than a foundation. Minimum starting amounts can be as little as $5,000, with future contributions being even less. Another advantage of a donor advised fund is that it is an easy vehicle to facilitate the gifting of appreciated stock, essentially gifting away capital gains tax-free while claiming a full deduction for the fair market value of the stock at the same time. This strategy allows the giver to indirectly gift securities to a charity that may not be capable of receiving such gifts. The donor advised fund will accept the stock transfer and liquidate it tax-free, allowing the giver to then choose a distribution of cash to a charity at a later date.

There are potential downsides. Most importantly, contributions are considered irrevocable, so you shouldn’t make a gift if you aren’t willing to part with the money permanently. In addition, basic charitable gifting limits apply. In order to take a deduction, you must itemize on your taxes. Then, depending on whether you gift cash or stock, you may be limited to claiming a maximum deductible amount of either 30% or 50% of your income and carrying over the excess gift amount to future years.

Think of a donor advised fund as your own private charitable fund. If you are looking to make a bigger impact with your giving, or if any of the other advantages listed above seem appealing to you, you may want to consider a donor advised fund. As always, you’ll want to consider the downsides as well, so make sure you reach out to your financial planner for more options.