Taxes are not an annual event. They're a multi-decade conversation.

The coolest types of investment accounts that almost nobody talks about are called DAFs. It stands for Donor Advised Fund. My name is Stefan and I'm the founder of Whitwell & Company, a wealth management firm serving business owners and C-suite executives from coast to coast. DAFs are a very, very powerful tool for anybody that is philanthropic-minded, and I'm going to walk you through how DAFs work and what some of their benefits are.

How DAFs work

So in some sense, you can think of a DAF as being like an IRA, but for your giving bucket, for your gifts to others for the purpose of charity. The way that they work is you can give money today. I can donate a million dollars today to a DAF, and then once the money is in the DAF, I can invest it and the money can grow. And while it's growing inside the DAF, it does not pay any taxes. It never pays any taxes. And then you, based on whatever your interests are, can determine and specify how much you want to give and to whom, as long as it's to a legitimate charity.

A couple of benefits

So, a couple of benefits from that. Number one: when you give to a DAF, you get a little bit more of a deduction, in some cases, than you would from a family foundation. Number two: the DAF is going to save you a lot of time, because they do all the administration on it. Whereas if you start a family foundation, you're going to be in charge of that. Third: it's really flexible. So you could call it the John Smith Foundation, and to the public, to everybody else, it would look like the same thing as if you started a foundation for your family. One of the other great benefits is it helps you control timing. So for example, if I regularly tithe to a church and I give every year, but let's say this year I had a lot of income and I've got a very high, one-off tax bill. Well, one of the things I could do is calculate the amount that I might give the church over the next five years, and I could give it all up front to the DAF and use that write-off to offset my income this year, so that I don't pay taxes on that income. And then every year I can give one-fifth of what I have in the DAF to the church, but I can then give it away on my time. So I get all the deduction up front, the flexibility of who I ultimately give it to, and the timing on that. I could instead choose to just reinvest, reinvest, reinvest, grow it, keep growing it until it's a lot bigger of an account, and then start to distribute it. So you have that flexibility as far as the timing.

Privacy and anonymity

And one last great benefit. If you've ever given to a public charity a significant amount of money, then you know what happens next. All of a sudden you'll find that, out of the blue, all these business development officers and other public charities start knocking on your door, because you have a public track record of having been generous and of being a philanthropist. The problem with that is it gets very tiring and burdensome when people are constantly asking you for money. So one of the nice benefits of a DAF is that it allows you to remain anonymous. You can give to any charity of your choosing and attribute the gift to your family's foundation, or you can choose to make an unattributed gift that's anonymous and keep your privacy. So there you go. Those are some of the benefits. You have more control, you can get bigger write-offs, you can control the timing, and if you have accounts that are at least 250,000, you can have the money in that account professionally managed by your RIA, just like you could any other kind of account.

Passing it on, teaching your children

One last fun idea to share with you. When you pass, you can indicate who you want to take over the right to decide which charities get to receive how much money from those accounts. Again, there's no timing rule on it. There needs to be somebody who has the authority to give money to charity when the right occasion arises. And when you're gone, one of the cool things is you can leave that right to your children, and hopefully maybe while they're alive do some things together so that you're teaching them about philanthropy. What are the questions that you should be looking into, for example, before choosing one nonprofit over another in a space where you care a lot about the issue? One thing that I've seen families do is they put some money in there and then they say, okay, every year, however much money we make on the principal, we're going to give that away. Let's say they have $10,000 that year to give away. Let's say they have two children. They might give each child $1,000 to give to a cause of their choosing, could be pets, could be kids, education, earth, whatever it is. But I think it's a fun idea for the parents to be the investment committee, as it were, and identify two or three questions that your heir, your son or daughter, needs to research and answer before they get to give money to that charity that they've chosen. So maybe those questions are: have you researched the management to see if they've got a strong management team? Or maybe you teach them about capital efficiency and say, hey, how much of this dollar that we're giving them actually goes to the charitable cause versus the pockets of the people running the place? And that kind of information is usually available in databases. So it forces them to learn the right questions to ask, how to be a smart consumer, and how to think about money in a smart way that could be used, of course, in philanthropy, but also could be used in dealmaking skills in a business context. And it instills in children early on the gift it is to be able to give to others and be able to see the impact on others. Maybe you take them to a couple different charities for their cause and help them learn what questions to ask, and see who's making the biggest impact, and decide who they want to give their portion of that year's money to. So those are some really fun things you can do around the family, kind of like stealth education, that maybe help you give your values around money to your children, not just the money itself. So play with that. If you have any questions on other ways that you can use them, let us know. We'd love to talk about it.

In another video, we talked about the differences between two different types of FSAs. In this quick conversation, I want to talk with you about HSAs. My name is Stefan. I run a nationwide wealth management firm called Whitwell & Company.

Pre-tax dollars, and use it or keep it

HSAs are health savings accounts, and they're pretty cool because you can fund them with pre-tax dollars. In 2025, the maximum contribution is $4,300 for individuals. [Editor's note: here "for individuals" means self-only HDHP coverage; the 2025 family limit was $8,550. These limits change every year. For 2026 the IRS limits are $4,400 self-only and $8,750 family, plus a $1,000 catch-up contribution at age 55 or older.] So you make a pre-tax contribution of $4,300, and one of the features that makes them very attractive is that they're use-it-or-keep-it, unlike FSAs, which are use-it-or-lose-it. So once you put that in the account, it's yours forever unless you spend it.

How you qualify

To qualify, there's an additional requirement that you need to fulfill that is not the case with FSAs. To get an HSA, one of the requirements is that you belong to a high deductible, or you have a high deductible health insurance plan. So one of the primary requirements in order to get an HSA is you've got to have a high deductible health insurance plan. If you don't, you don't qualify. But if you do have one, it'd be really smart to combine that with your HSA. Sometimes you don't have a choice, you just have to go with whatever the company offers. But just be aware, there are these differences.

HSA vs. FSA, and growing it tax-free

I think if you have the choice of both, as far as the FSA versus the HSA, the HSA is great because you can put away a little bit more, $4,300 versus $3,300. And it's not use-it-or-lose-it, it's use-it-or-save-it. And when I say save it: if you don't use it, the folks that run these types of accounts give you the ability to invest in stocks in the equity market. And there's some people who just max that out, who don't need to use it during the year thanks to good health, and they've grown it and grown it and grown it and grown it. And it's a tax-free account. So really, really valuable to use, whether you're using it to build your savings, or tax-free savings, or you're just using it to stretch your dollar and get more coverage on out-of-pocket medical expenses.

501c3s are not a loophole. Used right, they're a legacy builder. My name is Stefan and I'm the founder of Whitwell & Company, a nationwide wealth management firm serving business owners and senior execs. 501c3 is the part of the IRS code that talks about creating tax-free entities known as charities. Anybody can file a 501c3 and get it up and going, and a lot of people have.

A vehicle for a mission you care about

The thought behind it is that if there's a mission, a cause that inspires you that is of the public good, it can be a very powerful vehicle for you to not only make a difference while you're alive but potentially make a virtual family office that could be a benefit to your children and help them continue your good work. And I would say the sky's the limit in terms of creativity, as long as you're following the rules and there's truly a sense in your heart of wanting to make a difference and wanting to give back. But subject to those two things, there's a lot of room for individually tailoring it to things that you're into. So for example, maybe your thing is educating people on how to revitalize neighborhoods. So maybe it's about buying beat-up real estate, finding ways to improve it, take it from blight to beautiful and functional, make it a contributing asset to the community.

The rules, no self-dealing

You can't buy your beach vacation home and use that all the time and keep that inside your 501c3. So anytime there's kind of self-dealing, that would kind of defeat the purpose. You probably also shouldn't be buying your jet skis or your fancy sports car in the 501c3. But there's nothing that says you can't buy real estate, investment real estate, and do exactly that: improve it, lease it, rent it, as long as that supports the approved mission.

You can hire and pay people to run it

The other thing that people don't know is that you can hire people, your children, your heirs, experts in the field that you're interested in, to administer the 501c3. So if you had a sizable 501c3 and you built up the assets inside of that through tax-free income over, say, 30 years or so, that is a vehicle that your heirs, son or your daughter or whoever, could use. And while they're running that 501c3, they could be entitled to take a salary, even a very generous salary. In fact, if you look at how much money people make that are in the senior ranks of charities, they often make a million dollars a year. I mean, there's a lot of money in the charity business. There's a lot of flexibility there in terms of what you can pay people that you hire to run that charity. The other thing that people don't know is you can even, for the benefit of those people who are running the charity, set up the equivalent of a 401(k). There is a 401(k) equivalent that you can set up inside that 501c3.

A powerful vehicle, keep the spirit true

So it can be a really powerful vehicle. And again, in looking at that as a potential vehicle, you keep the spirit of it to be true, which is, it really needs to be a charity designed to be a public benefit and help in some area or another. But they're very powerful vehicles. And as long as you follow the rules, there's a lot of creative ways that you can use them to make a difference and potentially also make a difference for the loved ones in your estate.