DAF fundraising guide

When nonprofit, higher education, and healthcare organizations are looking to grow their fundraising income, donor-advised funds (DAFs) represent both a powerful opportunity and, sometimes, a persistent mystery. These strategic giving vehicles are now one of the fastest-growing forms of charitable giving in the United States, yet many organizations struggle to understand how they work, how to receive DAF gifts, and how to build meaningful relationships with DAF donors.

This guide breaks down the mechanics of DAFs, addresses common misconceptions, and offers practical strategies for identifying, cultivating, and stewarding DAF donors. Whether you’re new to DAF fundraising or ready to refine your approach, this article is designed to help your organization better tap into the growing pool of donor-advised philanthropy.

Click here to download our Donor Advised Funds Cheat Sheet.

What is a Donor-Advised Fund (DAF)?

A donor-advised fund (DAF) is a giving vehicle established at a public charity that allows donors to make a charitable contribution, receive an immediate tax deduction, and recommend grants from the fund over time.

While the donor officially surrenders legal control of the funds once contributed, they retain advisory privileges regarding the distribution and investment of the assets—and it’s rare for a DAF to go against the donor’s wishes in how the funds are distributed.

DAFs serve as a flexible and efficient way for donors to manage their charitable giving while also maximizing tax benefits.

How donor-advised funds work

DAFs operate on a simple structure:

• A donor contributes cash, securities, or other assets to a sponsoring organization, establishing the DAF in their name.
• The donor receives an immediate tax deduction for the contribution.
• The assets in the DAF may be invested, potentially growing tax-free over time. This allows the donor to increase their philanthropic assets. Donors may also make additional contributions throughout the lifetime of the fund.
• The donor recommends grants to qualified nonprofit organizations from the DAF, which the sponsor reviews and disburses.

While sponsors technically control the funds, donor recommendations are usually honored, provided the recipient is a qualified 501(c)(3) public charity.

Types of donor-advised fund sponsors

DAF sponsors fall into three main categories: national charities, community foundations, and single-issue or religious organizations. These DAF programs often have different focuses and structures.

National Charities

Organizations like Fidelity Charitable, Schwab Charitable, and Vanguard Charitable offer large-scale, investment-driven DAFs that appeal to individual and family donors across the country.

Community Foundations

These local or regional foundations offer DAFs tailored to donors who want to support specific geographic areas or causes.

Single-Issue/Religious Organizations

Some DAFs are affiliated with faith-based institutions or issue-specific charities, such as Jewish Federations or Christian Foundations, focusing on aligned missions and values.

DAF fundraising statistics and trends

Donor-advised funds have grown significantly in recent years. According to the National Philanthropic Trust’s 2024 DAF Report, DAFs granted nearly $55 billion to non-profits in 2023. While this outpouring of philanthropic funding was slightly lower than in 2022, it is still nearly double the grant-making totals of 2019, before the COVID-19 pandemic. 

Here are some additional highlights from the report:

• Total charitable assets held in DAFs exceeded $251.52 billion in 2023—marking a nearly 10% increase from 2022.
• The nearly $55 billion granted to nonprofits represented nearly 23% of total assets, meaning that nearly a quarter of the total DAF-held dollars were distributed in 2023.
• The average DAF account size is approximately $141,000.
• The number of individual DAF accounts continues to grow, surpassing 1.78 million.

While DAFs may have once been a relatively under-the-radar philanthropic tool, these numbers collectively reflect donors’ growing investment in DAFs. More importantly, they demonstrate just how important it is for nonprofit, higher education, and healthcare organizations to get serious about their DAF strategy.

What’s the difference between DAFs and Private Foundations?

While both donor-advised funds and private foundations offer ways for donors to support charitable causes, their structure, cost, and complexity make them very different.

The cost to establish a DAF is low, usually requiring no more than the initial fund contribution. While there are annual administrative fees, the actual burden of managing the account falls on the DAF sponsor, not the donor. There’s also no payout requirement, allowing the donor full flexibility in determining whether to disburse the funds or not in a given year.

Private foundations, in contrast, can be costly to set up. They require an official IRS designation, usually as a 501(c)3 organization. Once established, the foundation (and its funds) must be actively managed, with a 5% minimum annual payout. This administrative role could be accomplished by the founders or by hired staff, depending on the scope of the foundation.

While all of these considerations are important, privacy and control are two of the biggest drivers in choosing to set up a DAF vs. a private foundation. Private foundations in the United States are required to file a 990 form every year, and those forms are publicly available after filing. With DAFs, these disclosures are private.

For some donors, the challenges of establishing a private foundation are worthwhile, as it allows them to retain complete control over their own philanthropic funds and decisions. With a DAF, donors retain only advisory privileges. Though DAF sponsors rarely act against a donor’s wishes, as long as those recommendations fall within legally allowable giving requirements, they have the authority to do so.

Why donors use DAFs

There are many reasons that donors are drawn to DAFs for their charitable giving:

• Tax Efficiency: Donors receive immediate deductions for their charitable gifts, both on the initial contribution and on every subsequent contribution to the DAF.
• Ease of Use: The DAF provides a single, administered account to manage giving across any number of charities.
• Investment Growth: Once placed in the DAF, assets can grow tax-free before being granted, allowing for a larger impact than possible with direct giving.
• Legacy Planning: With an established DAF, families can give over generations, encouraging a legacy of philanthropy.
• Privacy: For donors that prefer to remain anonymous, accomplishing this is even easier through a DAF; funds can be distributed with no name attached.

Common misconceptions about donor-advised funds

While DAFs are continually growing in assets and use, there are still many misconceptions about these funds and how they work. Below are some of the most common misbeliefs about DAFs, plus the real story behind these funds.

Misconception #1: DAFs hoard money.

Private foundations are required to pay out at least 5% of their total assets annually, but DAFs are not bound by the same tax requirement. In fact, there is no minimum payout for DAFs, meaning that these funds can pay out as much or as little as they want, even making no grants in a given year. That doesn’t mean that DAFs are just holding onto that money, though—the National Philanthropic Trust estimates that less than 1% of DAFs are inactive, with no distributions in a three-year period.

Misconception #2: DAF giving is only for the wealthy.

Different DAF sponsors have different requirements for their accounts, which includes the minimum contribution allowed to open a DAF. However, some DAF sponsors allow minimum contributions as low as $5,000. Some are even less, meaning that donors from every income bracket have the opportunity to establish—and give from—a DAF.

Misconception #3: DAF money is inaccessible.

At first glance, DAFs may seem difficult for the typical organization to access. While there may be billions of dollars held in these funds, you can’t simply request them from the fund sponsor. The key to receiving DAF funding is in its name: these valuable funds are donor-advised. To draw on DAF resources, you have to go through the donor, building relationships with the individuals who established and make recommendations on the funds.

How to secure DAF grants

The path to unlocking donor-advised funds is no different than securing funds from a typical donor. Because DAF gifts are recommended by individual donors, establishing a strong relationship with the donor is the first step to securing these key funds. When a DAF donor is ready to give, they will simply recommend a contribution from their DAF sponsor, rather than making the gift directly.

How to Accept DAF Gifts

To receive philanthropic gifts from a donor-advised fund, organizations must be registered with the IRS as an active 501(c)(3) public charity. Keeping your organizational profile up-to-date on platforms like GuideStar can help signal your eligibility to DAF sponsors.

Many DAF sponsors have additional requirements regarding what can and cannot be funded. DAFs through the National Philanthropic Trust, for example, cannot support political parties or candidates or private grant-making foundations. Gifts also can not be used for any personal benefit to the donor, such as event tickets or meals.

How to find DAF donors

If your organization is looking to improve its DAF philanthropy strategy, there are a few steps you can take to identify new or returning DAF donors.

• Review past donations, looking for sponsor names such as Fidelity Charitable, Schwab Charitable, or Vanguard Charitable.
• Review lists of donor-advised grants from community foundations in your area.
• Partner with local wealth advisors and estate planners for referrals.

Tips for increasing DAF gifts

Increasing DAF giving often requires a thoughtful, multi-faceted approach to both educate your donors and encourage giving. Steps you can take to do this include:

• Include DAF info in appeals and newsletters.
• Promote DAF giving with a clear “Give from Your DAF” button or landing page.
• Ask major donors if they use a DAF and if they’d consider a multi-year grant from the fund.

As you make your year-end giving push, you can also encourage donors to recommend grants from their DAF before the new year, keeping in mind that most DAF funding takes a few weeks to arrive.

Donor-advised fund stewardship

While gifts made through a DAF do not come directly from the donor, stewardship of the gift is no less important. It is critical to thank both the donor and the sponsor; don’t skip acknowledgment just because the check came from Fidelity instead of Joe Smith!

Donor stewardship of DAF gifts includes the following:

• Report outcomes. Let DAF donors know how their support made a difference.
• Respect privacy. Ask the donor how they want to be recognized.
• Build relationships. Invite the donor to impact briefings, leadership circles, or special events, according to the level of their giving.

DAF fundraising best practices

As you consider and establish best practices for DAFs, it is important to remember that these funds are simply a giving vehicle. Like direct giving, grants from private and public foundations, and other donor-driven fundraising options, DAFs are simply one way for donors to engage philanthropically.

Still, it is important to understand the laws around DAFs. That includes becoming familiar with the requirements to receive DAF gifts, including how they can (and cannot) be used and how to acknowledge the gifts appropriately (including when it’s time to send tax receipts). DAF gifts should also be recorded accurately in your CRM, with primary or hard credit given to the sponsor organization and a soft credit given to the recommending donor.

Organizing your data this way can also help identify and target DAF donors in the future. One of the benefits of DAFs is the opportunity to grow the funds, increasing the donor’s philanthropic capabilities over the long run. With a good relationship, your organization may benefit from a donor’s DAF for years to come.

FAQs

Q: Can we receive recurring gifts from a DAF?

Yes—many donors set up recurring or annual grants through their sponsor.

Q: Can donors give anonymously?

Yes. One of the benefits of DAFs is that many DAF sponsors allow full or partial anonymity. Whether the donor is known to the organization or not, it is important to respect their wishes in public acknowledgements while still expressing gratitude for their gift.

Q: How long does it take to receive a DAF grant?

Most DAF gifts arrive within 1–3 weeks of the donor’s recommendation, though some may take longer.

Q: Can DAF grants be used for event tickets or benefits?

No. Gifts made from DAFs cannot provide personal benefits to the donor. This means that a donor cannot receive tickets, meals, or goods in return for a gift made through a DAF.

Q: Can we reach out to DAF donors?

If a DAF sponsor shares a donor’s contact information, organizations are welcome to reach out to them. Recipients of donor-advised funds should treat DAF donors like any other donor, offering them the same level of appreciation and stewardship as donors who make direct gifts to the organizations. 

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Carolyn Wynnack

Carolyn is a nonprofit-focused writer with more than 10 years of experience in non-profit and higher education event management, program development and management, prospect development, training, and data analysis.