Why nonprofits should embrace donor-advised funds

As a nonprofit leader, you may have heard about donor-advised funds, but if your organization isn’t actively encouraging or accepting them, you could be missing out on one of the most accessible and growing sources of philanthropic dollars today. Explore this breakdown of what they are, why they matter and how your nonprofit can make the most of them.

What is a donor-advised fund?

A donor-advised fund (DAF) is a charitable investment account that allows individuals to donate assets, receive an immediate tax deduction and recommend grants to charitable organizations.

This account is managed by a public charity, known as the sponsoring organization. Donors contribute to the fund, invest the assets for potential growth and then recommend grants at their own pace.

Key features of donor-advised funds

• Immediate tax benefits: Donors receive a deduction the year they contribute to the DAF—even if they don’t distribute the money until later.
• Flexibility: Grants can be made over months or even years, offering donors time to align giving with personal values or emerging needs.
• Variety of assets: Donors can contribute cash, stock, real estate and other complex assets, often avoiding capital gains taxes.

How donor-advised funds work

1. The donor contributes assets (cash, stocks, etc.) to a DAF
2. The contribution is immediately tax deductible
3. The donor recommends grants from the fund to nonprofits over months or years

This model gives donors flexibility and time to decide how their charitable dollars are ultimately distributed while also maximizing tax benefits.

Why should your nonprofit care about donor-advised funds?

1. The pool of potential funding is huge

According to the National Philanthropic Trust, DAFs hold over $250 billion in assets as of 2024, and that number keeps growing. In fact, in 2023, more than $50 billion in grants were distributed from DAFs to charities in the United States. If your nonprofit isn’t actively encouraging or accepting DAF contributions, you could be leaving major funding on the table.

2. DAF donors are both loyal and strategic

DAF holders tend to be thoughtful, repeat donors. Because they’ve already set aside funds for philanthropy, they are more likely to give consistently—even during uncertain economic times. For nonprofits, this can translate into a more stable and predictable stream of donations.

3. Easier for donors = better for your nonprofit

DAFs simplify giving for donors by removing administrative burdens. They can give appreciated assets (like stocks) without worrying about tax complexities and can support multiple nonprofits from a single fund. Rather than navigating the complexities of giving appreciated assets directly to a nonprofit, donors can contribute to their DAF and make multiple gifts with fewer administrative burdens.

For nonprofits, this means it’s often easier for donors to give large gifts through a DAF rather than writing a direct check or transferring assets. By positioning your nonprofit as “DAF-friendly,” you make it easier for generous people to give.

How can nonprofits attract and accept DAF gifts?

Make it clear that you accept DAFs

Add a section on your website and donation pages that says, “Give via Donor-Advised Fund,” including instructions on how to give. Many sponsoring organizations allow you to link directly to a DAF recommendation form, which should include details like:

• Your legal nonprofit name
• Employer Identification Number (EIN)
• Mailing address
• A sentence like: “If you have a donor-advised fund with a bank/community foundation, you can recommend a grant to [Your Organization Name].”

You should also include DAFs in your outreach campaigns. Be sure to mention them in year-end giving appeals, capital campaigns, planned giving promotions and others. Even a simple message in your email signature like, “Consider recommending a grant from your DAF” can make a difference.

Educate your donors

Some donors may not realize they can use their DAF to support your work—or they may not know about DAFs at all. Be sure to use newsletters, blogs, emails and social media not only to show that you accept DAFs but to provide educational material on DAFs. And don’t forget about in-person events, as those are a great time to let donors know that DAF giving is an option.

Train your team

If you have a donor who is thinking about contributing to your organization via DAF, you want your team to be able to help them.

The good news is that while DAFs can seem complicated at first, with a bit of training your fundraising team can learn to pitch the benefits of DAFs. Your team should know:

• What a DAF is
• Why donors should want to give via DAF rather than one-time donations
• How to recognize a DAF gift
• How to follow up with a DAF donor appropriately (usually through a thank-you note, even though the grant technically comes from the sponsoring organization)

Consider holding team training or assembling an FAQ to help your team get comfortable with DAFs.

Thank and steward DAF donors

While you won’t always know the full details of the donor (depending on how the grant was recommended), it’s critical to send a timely acknowledgement to the sponsoring organization and, if possible, to the donor; DAF donors appreciate personalized thanks just like anyone else.

Partner with DAF sponsors

Consider reaching out to local community foundations or DAF sponsors to build relationships. Community foundations often play an active role in recommending nonprofits to their DAF account holders and possess a deep understanding of local community needs. Building relationships with these organizations can provide valuable insights into their funding priorities and connect you with potential donors in your area.

Achieve this by setting up meetings with their giving teams, inviting them to events and keeping them informed about your organization's mission and impact.

Donor-advised funds aren’t a passing trend—they’re the future of giving. As a nonprofit, you don’t need to manage a donor-advised fund to benefit from them. You just need to be visible, ready and willing to accept grants from them. By incorporating DAFs into your fundraising strategy, you open the door to long-term, value-aligned supporters who are already committed to giving.