A Donor-Advised Fund (DAF) is very similar to a health savings account. Money is deposited into an account that can grow in value but instead of using the dollars to pay for health expenses, funds deposited into a DAF are granted out to charities. Donors make gifts directly to a sponsoring charity that maintains their DAF account, receive an immediate charitable deduction for their donations and then recommend the charities they want to receive grants.
In technical terms, each DAF is a segregated fund maintained by a qualified public charity which is created when a donor makes a gift of cash or assets. This gift allows the donor to receive an immediate income tax deduction, avoid the capital gains tax on appreciated assets and have the ability to make grant recommendations to charities at any time. The ability to make grant recommendations will continue for the life of the donor and then future generations can be appointed to make the recommendations for the rest of their lives.