As nonprofit financial advisors, we often hear basic questions like “What does DAF mean?” or “Why would donors let their money sit in a DAF instead of just donating it to nonprofits?” While there’s no doubt that donor-advised funds are impacting the fundraising landscape more and more, they still confuse many nonprofit professionals.

How do DAFs affect your organization, and why does that impact matter? Should you solicit DAF grants? Where do you even start?

We get your frustrations, and we’re here to help. In this guide, we’ll give you the full picture of how donor-advised funds impact nonprofits today and what you can do about it by exploring:

• What is a Donor-Advised Fund?
• What are the Benefits of Donor-Advised Funds?
• How Donor-Advised Funds Work
• Common Misconceptions About Donor-Advised Funds
• Latest DAF Trends
• How to Accept DAF Donations as a Nonprofit
• Tips for Securing More DAF Grants

The days when some thought donor-advised funds were a fad are long past. DAFs are here to stay, and your nonprofit must understand them to navigate today’s fundraising landscape. Let’s start with the basics.

What is a Donor-Advised Fund?

Donor-advised funds (DAFs) are charitable giving accounts that individual donors open with sponsoring organizations for the purpose of long-term giving. ‍

The donor, or DAF holder, serves as an advisor, meaning they can add money to the fund any time they like, let the sponsor manage it, and receive immediate charitable tax deductions.

Later, the donor can request distributions from the fund to specific nonprofits or causes. There are currently no regulations on how much DAFs must distribute annually, so actually donating the funds is up to the donor and sponsor’s discretion.

DAFs vs. Private Foundations

Donor-advised funds are not the same as private foundations.

A foundation is a type of nonprofit funded by one or more main donors to disburse grants to various causes. These organizations are classified as 501(c)(3)s, run by a board of directors, and regulated by the government. Conversely, DAFs are just charitable giving accounts managed by a sponsor organization. Foundations give donors more control over their funding but also require much more hands-on work to manage.

Think about it from your donors’ perspective: foundations are highly regulated and take a lot of work. DAFs, on the other hand, are low-lift, flexible, and often much more appealing.

Types of Donor-Advised Fund Sponsors

So, if donors aren’t directly in control of their DAFs, who is? DAF-sponsoring organizations typically fall into one of three categories:

• Community foundations that support local causes and offer DAF holders insight into charitable initiatives in the community.
• National banks, such as Fidelity and Schwab, whose charitable foundations offer customers a streamlined DAF creation process.
• Single-issue organizations that only provide DAF programs focused on a specific cause area.

No matter which type a donor chooses, their DAF sponsor is responsible for the fund's day-to-day management, including making investments and granting out distributions.

What are the Benefits of Donor-Advised Funds?

Donor-advised funds are designed to benefit donors, not nonprofits. DAFs offer donors more attainable tax deductions and the potential to grow charitable funds, ultimately donating more than they contributed in the first place. Plus, donors can store money for future philanthropic activity without the demands of running a foundation.

While they benefit donors more, the huge popularity of DAFs means they also offer some advantages for organizations like yours. Specifically, they can help nonprofits:

• Access more funding. The latest DAF data estimates that donor-advised funds hold more than $250 billion. By accepting DAF donations, your organization can tap into the massive amount of available funding sitting in these accounts.
• Identify major donors. Once you know someone is a DAF holder, you know they’re philanthropically inclined and have significant wealth. This information helps you easily identify high-capacity donors to cultivate as major giving prospects.
• Diversify revenue streams. Diversifying funding sources is a key tenet of responsible nonprofit cash management. Accepting DAF grants opens the door for an additional revenue stream to round out your fundraising strategy.

Additionally, accepting DAF donations doesn’t have to be a hassle. It’s easy with the right tools—which we’ll discuss more below!

We understand that many nonprofit leaders are concerned about soliciting gifts from donor-advised funds. It’s much more beneficial for donors to give directly to nonprofits rather than going through a third party (not to mention that the third-party organization controls the funds), and donors have little incentive to make grant requests. But even though DAFs aren’t the ideal giving vehicle for nonprofits, you still need to know how to access the available funds and make them work for your organization.

How Donor-Advised Funds Work

Let’s take a closer look at the inner workings of donor-advised funds. There are three groups involved in the process: donors/DAF holders, sponsoring organizations, and the nonprofits that eventually receive funds. Here’s how each one plays a role:

• DAF holders contribute money to their accounts at any time, which counts as a tax-deductible donation. After contributing, they can leave the funding alone or request that grants be made to specific organizations or causes.
• The DAF sponsor manages the fund, investing the money to give the fund the chance to grow over time. Later, they disburse grants to organizations per the donor’s preferences and requests.
• Nonprofits receive grants based on the donor’s grant requests. Donors might generally ask that grants go toward a certain cause or request specific donations (e.g., “Please grant $1,000 from my DAF to the Tennessee Wildlife Warriors”).

Depending on the donor and DAF sponsor, they might make grants often or allow the fund to grow for an extended period.

Since there’s no distribution requirement, grant requests can easily slip donors’ minds. That’s why it’s extremely important for nonprofits to remind donors to request DAF grants. We’ll explore best practices for doing so later on.

Common Misconceptions About Donor-Advised Funds

You’ve likely seen plenty of varying opinions about DAFs online, in the news, and among your peers. While we can’t address every stance, we can clear up some common misconceptions that we’ve seen in the industry.

“DAFs are designed for nonprofits.”

As we discussed earlier, donor-advised funds benefit donors first. DAFs are not designed for nonprofits and often work against your best interests. Nonprofits rarely have a good reason to create a DAF themselves, and if they do, they’ll likely benefit from creating an endowment instead so they don’t lose control of their funds. Some legislation is pending as lawmakers try to make DAFs more beneficial to nonprofits, but they still lack a lot of regulation.

Although the structure of DAFs does not help nonprofits, remember that it does benefit donors. Donors will continue to use DAFs, so your organization must ask for DAF grants and educate donors about how to request them.

“Donors and nonprofits own the money in a DAF.”

This is not true—once donors contribute funds to the DAF, the DAF owns them. Donors can request funds and ask that their sponsor grant them to certain organizations, but they do not own the funds after contributing them. The managers of a donor’s DAF can deny their requests, although this is rare.

“Nonprofits should prioritize DAFs over endowments.”

Whether you focus on securing DAF or endowment gifts is up to your nonprofit. Donor-advised funds and endowments are entirely different types of gifts and fundraising asks, and one may be better for a certain donor than the other. Endowments provide more immediate impact and give your nonprofit more control over the funds, but many donors prefer the ease of DAFs.

Instead of choosing one, focus on asking for both DAF grants and endowment gifts to meet your donors where they are. You can easily solicit DAF grants and endowments (along with stocks and cryptocurrency!) with Infinite Giving’s donation page tool, providing your donors with the flexibility to give however suits their needs best.

Latest DAF Trends

The DAF landscape is ever-changing, but the last few years have proven that donor-advised funds remain popular and influential in the world of philanthropy.

To give you a brief overview, here’s what the data from the National Philanthropic Trust’s 2024 DAF Report shows:

• Total charitable assets in donor-advised funds increased by 10% year-over-year, reaching $251.52 billion.
• There are over 1.7 million DAF accounts open as of 2023.
• The estimated average amount of money in one DAF account is $141,000.
• The DAF payout rate (grants made relative to charitable assets available) is around 24%.
• Donors contributed $59.43 billion to DAFs in 2023 and granted $54.77 billion to nonprofits.
• While grants from DAFs declined slightly in the last year, the compound annual growth rate from 2019-2023 is still 17.8%.

Alongside donor-advised funds’ steady growth and popularity comes plenty of media attention and concern from lawmakers. In 2024, the IRS and U.S. Department of the Treasury proposed several new regulations that would, if passed, change how DAFs and “donor advisors” are classified and add new anti-abuse rules.

These changes would largely impact sponsoring organizations and DAF-holders rather than nonprofits. For nonprofits just looking to solicit DAF grants, these regulations should have little effect on how you operate.

How to Accept DAF Donations as a Nonprofit

Historically, DAFs have not been very accessible for nonprofits. Organizations would have to jump through hoops and go back and forth with donors before securing a DAF grant. However, tools like Infinite Giving simplify the request process and make it easier for any nonprofit to accept DAF grants.

With the right tools, all you need to do is follow these four simple steps:

1. Invest in a DAF giving tool to simplify the donation process. Tools like Infinite Giving enable nonprofits to ask for donor-advised fund grants right from their donation pages. These tools remind donors to give through their DAFs and provide immediate instructions for requesting grants.
2. Add a DAF widget to your donation page. Add our widget to your regular, branded giving page so donors can see that you accept DAF grants any time they consider donating. To target specific donors likely to have DAFs, just send them the link directly.
3. Give donors information about how to request DAF grants. The right DAF giving tool will do this for you. However, you should be prepared to field donors’ questions and talk them through requesting grants from their sponsors if needed.
4. Promote DAF giving across channels. Once you have the infrastructure to accept DAF donations, let your donor base know! Promote giving through DAF grants across your standard communication channels, such as email, social media, and text.

After donors request a DAF grant through your donation page widget, make sure to:

• Keep an eye out for their contributions and thank them as soon as possible.
• Mark donors as DAF holders in your database.
• Plan personalized ways to steward those funds.
• Maintain and grow the relationship with these high-value donors.

How Donors Can Request a DAF Withdrawal

Nonprofits should be familiar with all aspects of this process to facilitate donor requests and give them the necessary information. So, what does the request process look like from a donor’s perspective?

Donors must contact their DAF sponsor and request a certain amount be granted to a specific organization or cause (the sponsor can say no, but it’s rare). Exactly where they make the request and what details they need to provide will vary based on their sponsoring organization. If they use our DAF giving tool to make the request, they can choose their DAF provider and instantly get detailed instructions for requesting DAF grants from that sponsor.

Infinite Giving Makes DAF Gifts Easy

Our system includes the most popular DAF providers to help you accommodate as many donors as possible. If one of your donors has a community foundation or issue-based organization as their DAF sponsor, tell them to reach out to their sponsoring organization and provide details like your nonprofit’s name, contact information, and the exact donation amount.

Tips for Securing More DAF Grants

Excited to start opening the door for DAF donations? Use these tips and best practices to improve your fundraising strategy.

Add a DAF widget to your donation page.

We can’t understate the value of a DAF widget like Infinite Giving’s. When you highlight DAFs directly on your donation page, you’ll show every website visitor and potential donor that it’s easy to support your nonprofit via DAF grants. For anyone curious, you should also link to another page on your site explaining donor-advised funds and how they help your nonprofit.

Promote DAFs on your website.

Your donation page shouldn’t be the only place donors can find information about DAF fundraising. Consider marketing DAFs in other ways on your website, such as by:

• Adding information about DAF giving to your “Ways to Give” page.
• Writing blog posts about donor-advised funds and how your nonprofit engages with them.
• Creating a banner or pop-up message that announces you now accept DAF donations.
• Highlighting DAF donors on your testimonials page.

Once you’ve created these pages, cross-promote them with social media posts, emails, and text messages to spread the word further.

Strategically reach out to donors.

Use prospect research to identify potential DAF holders within your support base and contact them individually. Plan strategic outreach to let them know you accept DAF donations and encourage them to request grants for your nonprofit. Make these messages as personalized as possible, highlighting specific programs they could support with DAF grants that align with their interests and giving histories.

Start Tapping Into Donor-Advised Funds

Now that you know the basics, start your nonprofit’s journey with donor-advised funds by investing in the right giving tool. While DAFs may be a hassle for nonprofits, they’re also an opportunity you can’t afford to miss out on. Make securing these valuable gifts as easy as possible to increase your organization’s financial sustainability, no matter how the philanthropy landscape evolves next.

Eager to learn more about how to sustainably grow your organization’s finances? Check out the following resources from our experts:

• Infinite Giving’s Donor-Advised Fund Software & DAF Widget. Explore our intuitive donation page tools and learn how our DAF software simplifies the giving process for nonprofits and donors.
• How to Accept Stock Donations: The Ultimate Nonprofit Guide. Why not expand your donation options even further? Discover how and why your nonprofit should accept stock gifts in addition to DAF grants.
• Cash Management for Nonprofit Organizations: Basics + Tips. Diversifying your revenue streams is only one part of responsible nonprofit cash management. Learn the basics and other strategies to improve financial sustainability.