The Rise of DAF Giving: How to Reach These Strategic Donors

Written By Jody Stolldorf

Donor Advised Funds (DAFs) aren’t new, but given the buzz around them, you may feel like this funding opportunity is on the rise, and you’d be right! The popularity of these funds, combined with the upcoming tax law changes, means DAFs are having a moment. Let’s dive in and discover more about the benefits of DAFs and how your organization can tap into these funds and connect with DAF donors.

What is a DAF?

A Donor Advised Fund (DAF) is a type of investment account intended solely for charitable giving. A donor sets up a DAF through a sponsoring 501c3 organization, like a community foundation. Madison nonprofits and funders have greatly benefited from Madison Community Foundation’s donor-advised program. Investment companies such as Fidelity and Schwab have also created 501c3 charitable organizations to support DAF programs. The donor contributes to the DAF, which is invested and grows, tax-free, over time. When the donor wishes to issue a grant from the fund, they make a recommendation to the sponsoring organization, which then vets the recipient nonprofit and issues a grant from the DAF account.

DAF Stats

  • DAFs have seen a 637% growth since 2014. In the past decade $300 billion has been granted from DAF accounts.

  • $54.7B was granted from DAFs in 2023.

  • DAF’s are not just for higher capacity donors and gifts. The average size of a DAF is $150,000.

  • DAFs signal philanthropic people who put thought and intention into their giving. .

  • DAF donors are age 67 on average with a net worth of $1M+. They tend to use their funds actively.

  • Younger generations are adopting DAFs at a higher rate.

Source: National Philanthropic Trust

Why do donors choose to give through DAFs?

Donors receive the tax benefit when their assets/funds are deposited into the DAF, not when they are distributed. Once the funds are in the DAF, the sponsoring organization takes ownership of the funds. Donors can advise on how the funds are invested and distributed, but management of the account, including record keeping, statements, and tax reporting, is overseen by the sponsor. This simplifies management for the donor and allows them to be strategic about when they donate.

You’ve likely heard that donors are expected to “bunch” their 2025 donations to take advantage of the current tax laws. This is the perfect scenario for DAF donors, who can front-load several years' worth of donations into one DAF contribution, get that immediate tax deduction, then take time to consider how those funds will be distributed.

Reaching out to DAF donors

How can you make sure your nonprofit is top-of-mind for a DAF grant?

  • Make it easy for donors

    • Add an option on your pledge page/form where donors can indicate they will support you through a DAF grant. This will help you identify DAF donors in your CRM to ensure you match their account name to the donor when you reach out to thank them.

    • Prominently display your EIN online and in your development materials (this is a best practice, in general. Your corporate donors will likely need this as well).

    • Make sure your legal name is listed with donor materials/information if it differs from your commonly used name. This streamlines the vetting process for the sponsoring organization that ultimately issues the grant.

  • Include DAF donors in your legacy outreach

    • Donors can designate their DAF as the beneficiary of their will, trust, retirement account, insurance policy, or other estate-planning vehicle. They are likely to be thoughtful about legacy giving and a receptive audience for these types of communications.

Managing DAF grants – things to know

  • Gift receipts differ for DAFs

    You skip the tax-deductible language in your receipt letter for a DAF grant. The donor already received a tax credit when they contributed to the DAF account, so there is no additional benefit once the funds are distributed.  

  • Restrictions on DAF funds

    DAF grants can’t be used for bifurcated gifts like event tickets or auction items, where only a portion of the gift is tax-deductible.

  • Multi-year giving from DAFs

    Grants from DAFs can be used for multi-year pledges, but there are some restrictions on how these are tracked and reported.  Talk with your DAF donor and the sponsoring organization about how best to establish and track these recurring donations.

DAFs are a great tool for funders and a valuable funding source for nonprofits. When you specifically reference these accounts in your messaging, you can unlock giving potential and create deeper partnerships with your donors.

Sources and resources:

Jody Stolldorf
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