Demystifying donor-advised funds
Donor-advised funds (DAFs) increasingly dominate philanthropy, reshaping how money moves from generosity to impact. What began as a niche giving tool now sits at the center of modern fundraising, influencing how donors give, engage, and plan their legacy. As fundraisers, DAFs are no longer a trend we can get to when we have time. They are the future of charitable giving, especially for individuals.
Below: Watch the video recording of our recent panel discussion, ‘Demystifying donor-advised funds’.
DAFs are here to stay—and to grow.
The 2025 Annual DAF Report produced by the Donor-Advised Fund Research Collaborative shows clear growth in both assets and distributions, tracking closely with market performance. In 2024, DAF assets reached roughly $326 billion, nearly doubling where they stood just four years earlier. Donors recommended almost $65 billion in grants to nonprofits in 2024—the largest total on record.
Together, these trends tell a simple story: As DAF balances grow, so does giving. More money is flowing into the system, and more of it is moving—steadily and at scale—to nonprofits doing critical work.
Donors use donor-advised funds for several reasons:
They offer tax advantages. Donors can claim an immediate tax deduction when they contribute and often avoid capital gains taxes on appreciated assets, giving them more to put toward the causes they care about.
They make giving simpler for the donor. A DAF lets someone contribute when the timing is right, then take the time to decide where their funds can do the most good.
DAF sponsors make the process easier, removing friction even for complex gifts of assets. Even family foundations increasingly use DAFs because, compared to giving directly through their foundations, giving through a DAF involves less administration, simpler tracking and reporting, and lower costs. Donors stay deeply involved in their philanthropy but spend less time on compliance and more time on impact.
“When your processes stay clean and human-centered, DAFs stop creating friction. They become what they should be: one more clear path between generosity and impact.”
The benefits extend beyond donors to nonprofits. By the time a gift reaches an organization, the donor has already made the decision to allocate funds to philanthropic purposes (in other words, ‘to part with’ the funds). That means fundraisers get to focus their time on the fun part: building a relationship toward purpose, impact, and collaboration. Furthermore, since DAFs require clear succession plans, many DAF-holders name nonprofit beneficiaries directly—turning today’s generosity into sustainable, future support.
There’s no such thing as a ‘DAF donor’.
Giving through a DAF is not an identity. A DAF is a giving vehicle, often one of many that a donor uses in their philanthropy. When you focus on the vehicle, you risk losing sight of the person behind the gift, as well as all the other ways they may be giving (or interested in giving) to your mission. When you focus on the human, you create space for genuine stewardship, partnership, and impact.
When donors give through DAFs, our work as fundraisers doesn’t change. You are stewarding a person with values, questions, and priorities. By reaching out and getting to know the human behind the fund, you can discover more connections with your missions. Donors who give through DAFs, especially those who make larger contributions, are often bringing intentionality to their philanthropy, so keeping in touch—even just with periodic impact updates—can go a long way to opening the door to more opportunities.
It’s time to release old assumptions.
DAFs have been around for more than 100 years but didn’t become readily accessible until the 1990s. Since then, they have grown dynamically and evolved in the process. Many of us remember the early days, when working with DAFs was complex and often frustrating.
“In practice, the gap is not in the availability of donor information, but in nonprofits’ ability to capture, store, and use that data.
Simple enhancements to internal systems can create opportunities for improved stewardship, renewal solicitations, and even relationships. ”
The good news is that with growth in popularity, DAFs have become more convenient for fundraisers, as well as for donors. We need to start challenging a few assumptions:
Myth 1: DAF dollars sit idle. In fact, data show that funds are not only flowing, they are flowing consistently and at scale. Many DAF sponsors have been strengthening their distribution policies, placing greater emphasis on getting funds into the community. As balances grow, grantmaking continues to grow alongside them.
Myth 2: DAF donations are mostly anonymous. In fact, most donors choose to include at least their fund name and mailing address with their distribution so that organizations can share more information. In practice, the gap is not in the availability of donor information, but in nonprofits’ ability to capture, store, and use that data. Simple enhancements to internal systems can create opportunities for improved stewardship, renewal solicitations, and even relationships.
Myth 3: The people to get to know are the DAF sponsors. In fact, many DAF sponsors have policies that prevent them from recommending specific nonprofits to donors; others simply have such large fund loads that recommendations are not feasible. While local, community-based DAF sponsors may have mechanisms for ‘connecting the dots’ between donors and nonprofits, in most cases, your time is best spent on (1) making your organization discoverable on online nonprofit listing and rating platforms and (2) conducting intentional outreach to the donors who have given through DAFs to your organization.
When we let outdated assumptions linger, we risk creating distance between our organizations and our supporters. DAFs hold funds ready for distribution, guided by real people, and supported by evolving sponsor practices that make connection and impact more possible than before.
Here’s how to get started.
Creating a DAF strategy can feel daunting among competing priorities. The good news is that a few fundamentals go a long way:
Begin with tracking. Decide on a simple, consistent way to track the DAF sponsor, the fund name, and the underlying donors for any incoming gifts. Make sure you can easily identify which gifts were received through DAFs, as well as which donors have given through DAFs in the past.
Make sure you’re catching contact information. Train your gift processors to capture the contact information provided for the underlying donor, rather than only the contact information for the DAF sponsor.
Make a mail strategy. When a first-time donor gives through a DAF, you most likely will be provided with a mailing address as their primary contact information. As so many of our fundraising programs move to digital-first engagement, we forget that simple mail pieces are very effective at cutting through the noise and sparking conversations. As appropriate, include donors who give through DAFs in your direct response program. In addition, for midlevel and major donors, integrate personalized outreach, such as a ‘welcome packet’, handwritten notes, and impact reports. Include your business card so that, if the donor wants to connect with you by phone or email, they know how to do so.
Keep engaging even if you don’t get responses back. Some donors will want deeper engagement. Others will not—and that is okay. Keep them on your mailing list, and steward the relationship consistently. Do not let limited access stop you from making asks. Continue to invite support by mail when direct contact proves difficult. Silence does not equal disinterest.
Finally, engage DAF sponsors where it makes sense, but don’t spin your wheels. Know which DAF sponsors your donors like to use. Get smart about them and build relationships where appropriate. But focus most of your time on the donors rather than the sponsors.
When your processes stay clean and human-centered, DAFs stop creating friction. They become what they should be: one more clear path between generosity and impact.
Donor-advised funds are not a passing trend to work around. They are a durable, growing part of how generosity shows up in the world. When we focus on the people behind the funds, challenge outdated assumptions, and strengthen our internal practices, DAFs become an opportunity rather than an obstacle. Done well, this work connects more dollars to missions, deepens donor relationships, and builds a more stable future for the causes that matter most.
