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  • Writer's pictureMitch Stein

So… What is a DAF? Donor Advised Funds 101 for Fundraisers

This DAF 101 breaks down the key details on what a DAF is, how a DAF works and where DAFs come from.

This article covers:

  • DAF definitions

  • How big are DAFs?

  • How do DAFs work?

  • What are the different kinds of DAFs?

  • What is the history of DAFs?


DAF Definitions

“a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account.”

More simply put, a Donor Advised Fund (DAF) offers tax-advantaged savings accounts for charitable giving - similar to a 401k for retirement funds or an HSA for healthcare expenses. Donors make tax deductible contributions to their DAF account, they can invest the money once in the account and then make grants over time. 

The fund is operated by the sponsoring organization and individuals hold separate accounts that make up the fund. At Chariot, when we are referring to a sponsoring organization, we’ll use the term “DAF sponsor” and when we’re referring to an individual donor’s account at a DAF, we’ll use the term “DAF account”. 

Colloquially, people will often use the term DAF to interchangeably refer to an aggregate fund, a sponsor (e.g. calling Fidelity Charitable a DAF instead of a DAF sponsor) or an individual’s account (e.g. a donor saying “I made a gift from my DAF” instead of their DAF account). Those uses are widely understood and accepted, but we use more specific terminology for clarity. 


How big are DAFs?

The most important numbers to know about DAFs:

  • $229 Billion: There was over $229 billion in DAF assets at the end of 2022. 

  • $52 Billion: During 2022, there was over $85 billion contributed into DAFs and $52 billion granted out to nonprofit organizations.

  • $117,466: The average DAF account balance was $117,466 at the end of 2022.

  • 3 Million People: There were nearly 2 million individual accounts at the end of 2022. On average, each account is accessed by 1.6 people (many couples or families have shared accounts), meaning over 3 million people are using DAFs for their philanthropy.

  • 1,151: There were 1,151 DAF sponsors managing Donor Advised Funds as of year end 2022


How do DAFs work? 

Individuals go through a few steps to set up a new DAF account, the requirements for which vary greatly depending on the DAF. These can include a minimum initial balance, certain set up or initiation fees and other steps typical of opening a new bank account.

A donor can expect a variety of fees related to their DAF, which vary widely depending on the DAF sponsor, including:

  1. A management fee charged as a percentage of assets held in an account

  2. Additional investment management fees on any investment products

  3. Fees to sell or liquidate assets in the account 

  4. Some also charge small fees on distributions 

Once set up, individuals can fund their DAF account in a variety of ways.

  1. Simple one time cash contributions, made via credit card, debit card, ACH or wire transfer

  2. Automatic cash deposits made periodically from any of these sources, or even a direct contribution from a paycheck

  3. Public securities contributions, made by transferring stocks, bonds, cryptocurrencies and other publicly traded assets

  4. Non-public or illiquid assets, like shares of private companies, real estate or even art.

Once funded, DAF account holders are free to invest the money in their account as they wish. DAF sponsors have typically make it easy to choose from a variety of investment options that align with the individual’s goals, investment horizon and risk tolerance. 

DAF account holders can recommend grants at any time. They search organizations by name or EIN and can make grant requests online. Each request has to technically be “approved” by the DAF sponsor, but typically that approval process involves:

  1. Confirming there is sufficient funds in the account 

  2. Checking that the recipient nonprofit is a 501(c)(3) organization 

  3. Checking that the recipient nonprofit is in good standing with the IRS

Once approved, the funds are sent to the recipient organization. If the DAF sponsor has ACH details for an organization, they will sometimes be able to transfer funds electronically. However, the vast majority of organizations will receive gifts via checks in the mail. 

DAF account holders do have the option to make their grant requests anonymously, in which case the gift would arrive only with the name of the DAF sponsor (e.g. Fidelity Charitable). However, less than 4% of DAF grants are made fully anonymously, according to the DAF Research Collaborate 2024 Report. Otherwise, gifts typically arrive with the name of the DAF account (which can be an individual’s full name or often a separate name given to the account like “The Smith Family Fund”) and a mailing address of the account holder. 

The expected timeline for gift approval and delivery varies greatly between DAF sponsors, but can be anywhere from a few weeks to a few months. Issues can arise if a DAF sponsor has incorrect information on file, like the organization’s name or mailing address. 

Curious how people decide if a DAF is right for them? Check out this guide.


What are the different kinds of DAFs? 

There are 1,151 Donor Advised Funds in the United States with sponsors that fall into 3 key categories:

  1. 73 are National Charities

These are organizations like Fidelity Charitable or Vanguard Charitable which are 501(c)(3) nonprofits, typically affiliated with financial institutions and serve as an extension of their wealth management solutions for clients. These sponsors manage the largest DAFs and are popular choices because they are integrated into a broader personal finance offering, making for easy transfer of assets and centralized management of accounts. 

This also includes newer entities that were started primarily to provide DAF accounts for individuals and have invested in mobile-first, user-friendly platforms like Daffy and Charityvest. 

  1. 725 are Community Foundations

These are organizations like Chicago Community Trust or Silicon Valley Community Foundation which provide DAF accounts in addition to their own grant making activities in their communities. These are popular choices for people who are focused on a specific geography for their philanthropy, like the financial benefit of their DAF assets to still go to the local community and prefer the hands-on engagement they typically offer. 

  1. 353 are Single-Issue Charities 

This includes organizations like the Jewish Communal Fund or the National Christian Foundation, which sponsor a DAF either for one specific charity or as an umbrella over a general cause area. These are popular for people who want to concentrate their DAF giving or align their DAF accounts with a mission that’s important to them.


What is the history of DAFs? 

The first Donor Advised Fund was set up by the New York Community Trust in 1931 and community foundations around the country followed suit in subsequent decades. Several tax reforms in the 60s, 70s and 80s paved the way for wider adoption of the DAF model and in 1991, Fidelity established The Gift Fund as a public charity. 

This opened the door for many other financial institutions to establish their own DAF sponsoring  entities, which increased advisors’ awareness of DAFs as a beneficial tool for their clients and boosted investment in technology platforms that manage the offerings. 

In 2007, The National Philanthropic Trust began aggregating data from DAFs around the country and produced the first industry-wide report on DAF statistics which is now published annually. Over the past 10 years, DAF assets have grown 5x, Contributions & Distributions have both grown 6x and the number of accounts have grown 9.5x. 

If you’re interested in getting more DAF dollars and donors, book a demo of Chariot’s DAF fundraising tools for nonprofits today.


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