Two things are often true at once for someone who has done well: they hold a concentrated, highly appreciated stock position, and they intend to give some of their wealth to causes they care about. A donor-advised fund is a tool that lets those two facts work together instead of separately.
When you donate appreciated stock you have held long enough directly to charity, rather than selling it first, you generally avoid the capital-gains tax you would have owed on the sale, and you may claim a deduction for the fair market value, subject to the applicable rules and limits. The same charitable dollar costs you less, because the embedded gain is never taxed. Giving cash after selling leaves that advantage on the table.
A donor-advised fund is a charitable account you contribute to now, take the deduction for now, and grant out to charities over time. It is useful with a concentrated position for two reasons. It lets you contribute appreciated shares, capturing the tax efficiency above, without needing each charity to accept stock directly. And it separates the timing of the tax deduction from the timing of the giving, which matters in a high-income year, such as a liquidity event, when a deduction is worth the most.
A donor-advised fund is not the only charitable vehicle, and it is not right for every situation; other structures serve different goals. But for someone holding appreciated stock who intends to give anyway, it is often the simplest way to be more efficient about generosity they were already planning. This is general information, not personalized tax, legal, or investment advice; the deduction rules and limits are specific, so plan the gift with your tax advisor. We coordinate the investment and concentration side with that planning rather than treating them separately.
Give the appreciated share, not the after-tax cash.