QCDs and DAFs: A Practical Guide for Donors and Advisors

In my role at National Philanthropic Trust, I spend a great deal of time speaking with wealth advisors, estate planning attorneys, and accountants about how retirement assets fit into a broader charitable plan.

One topic that consistently surfaces is the relationship between Qualified Charitable Distributions and donor-advised funds. The rules are clear, but the planning opportunities are often misunderstood.

For donors who want their philanthropy to be tax-efficient and strategically aligned with their broader financial plan, understanding how these tools interact is essential.

What Is a Qualified Charitable Distribution?

A Qualified Charitable Distribution (QCD) allows an individual age 70½ or older to transfer funds directly from an IRA to an eligible public charity.

For the tax year 2026, an individual may donate up to $111,000 through QCDs (or $222,000 for a married couple). QCDs count toward required minimum distributions (RMDs) — the withdrawals individuals must begin taking from most retirement accounts starting at age 73 — and are excluded from taxable income. The age for RMDs is set to increase to 75 in 2033.

In practice, this means a donor who does not need IRA withdrawals for personal spending can redirect required distributions to charity without increasing adjusted gross income (AGI).

For some retirees, this detail matters. AGI influences Medicare premiums, the taxation of Social Security benefits, and other income-based tax thresholds. A QCD reduces income at the source. Unlike standard charitable deductions, which are itemized and can sometimes be limited or “added back” for alternative minimum tax (AMT) purposes, a QCD is never included in your income to begin with. If you are close to the AMT threshold, a well-timed QCD can offset other significant income events — like a large capital gain — to help manage your overall tax liability.

QCDs must be:

• Made from an IRA
• Transferred directly from the custodian to a qualified 501(c)(3) public charity
• Reported in accordance with IRS rules

Can You Use a Qualified Charitable Distribution to Fund Your Donor-Advised Fund?

This is one of the most common questions I receive. The answer is no; you cannot currently use a QCD to fund a donor-advised fund (DAF). Under current IRS rules, a QCD cannot be directed to private foundations, supporting organizations, or DAFs.

The reason is structural. QCDs are designed to move retirement assets directly to operating charities. DAFs, while housed within public charities, allow the donor to retain advisory privileges over future grantmaking. Because of that advisory component and the potential for funds to remain invested before distribution, Congress excluded DAFs from eligibility.

There are a few additional technical points worth noting:

• The QCD transfer must go directly from the IRA custodian to the qualifying charity.
• If you receive the funds personally and then gift them, the distribution will be taxable.
• You cannot both exclude the QCD from income and claim a charitable deduction for the same amount.

For donors who are committed to using a DAF as part of their long-term philanthropy, this rule can feel limiting. In practice, it often leads to more intentional planning with other assets.

How Qualified Charitable Distributions and Donor-Advised Funds Work Together

In conversations with donors and advisors, we rarely focus on a single charitable vehicle. The more productive discussion centers on how multiple tools can work together across a balance sheet and across time.

QCDs and DAFs serve different purposes. When coordinated thoughtfully, they complement one another.

Align Retirement Income Planning with Annual Giving

For donors over age 73 who must take RMDs, a QCD can satisfy that obligation while supporting charities they already intend to fund.

This approach:

• Reduces AGI
• Supports operating charities directly

Meanwhile, many donors use a DAF earlier in their financial lives to build a charitable “reserve.” During peak earning years, they may contribute appreciated securities or other assets to a DAF, receive an immediate charitable deduction, and set aside capital that can support future grantmaking. By the time retirement arrives, that charitable pool is already in place.

In this way, QCDs and DAFs often serve complementary roles: QCDs can annually redirect RMDs to charity, while a DAF provides a flexible platform for longer-term philanthropic planning, family engagement, and multi-year initiatives.

Optimize Different Asset Classes for Different Goals

QCDs draw from retirement accounts, which are generally taxed as ordinary income.

DAFs are frequently funded with appreciated securities or other complex assets that would otherwise trigger capital gains tax if sold.

Using each vehicle for what it does best can improve overall tax efficiency:

• QCDs reduce ordinary income tax exposure from IRAs.
• DAF contributions can eliminate capital gains on appreciated assets and generate a charitable deduction, subject to applicable limits.

For many high-net-worth donors, this coordinated approach results in better after-tax outcomes without increasing total giving.

Separate Immediate Impact from Long-Term Philanthropic Strategy

Some donors prefer to use QCDs to support a defined set of charities each year. Those gifts are direct and immediate.

At the same time, they maintain a DAF to:

• Plan multi-year initiatives
• Involve children or grandchildren in grantmaking
• Respond to emerging needs
• Time grants independently of tax-year decisions

This separation can make philanthropic decision-making more deliberate. It also helps families build a sustainable giving practice rather than reacting to year-end tax planning alone.

Coordinate Lifetime Giving and Estate Planning

Retirement accounts are often among the least tax-efficient assets to leave to heirs. Some donors choose to reduce their IRA balances during their lifetimes through QCDs while preserving other assets for heirs or for charitable vehicles.

Others name a DAF as a beneficiary of retirement assets at death, while using QCDs during life to manage tax exposure.

These strategies are highly individualized, but they illustrate a broader point: QCDs and DAFs address different planning questions. When advisors and philanthropic partners are aligned, the overall strategy becomes more cohesive.

A Broader Perspective on Strategic Giving

At NPT, we are focused on helping donors and advisors approach charitable planning with the same rigor applied to investment and estate planning. That includes clearer education, stronger partnership with advisors, and more thoughtful integration across financial and philanthropic goals.

Many of the conversations we have, both internally and externally, center on how to make charitable planning more accessible, more strategic, and better coordinated. QCDs and DAFs are part of that evolution.

For donors who are just beginning to explore these tools, the starting point is understanding the rules. For those already well versed in philanthropy and tax law, the next step is coordination.

If you would like to discuss how DAFs can fit into a broader financial and philanthropic plan, our team at National Philanthropic Trust is available to continue the conversation.

Editor’s Note: The regulatory landscape surrounding charitable giving, including Qualified Charitable Distributions and DAFs, continues to evolve. At the time of publication, current IRS rules do not permit QCDs to be directed to DAFs; however, new legislation that could impact these rules is currently moving through Congress. We encourage donors and advisors to stay informed as this area develops. National Philanthropic Trust will continue to monitor any changes and update our guidance accordingly.

Contact NPT at (888) 878-7900 or npt@nptrust.org.