The Rise of Donor-Advised Funds: What It Means for Nonprofits

Donor-advised funds (DAFs) have exploded in popularity over the past decade, now representing billions of dollars in charitable assets. The appeal is clear: donors receive an immediate tax deduction when they contribute to a DAF, then recommend grants to nonprofits over time at their own pace.

For donors, this flexibility is a major draw. For nonprofits, the picture is more complicated. Critics point out that DAF assets can sit idle for years — or indefinitely — without ever reaching operating charities. A 2023 study found that a significant portion of DAF assets are held in accounts that have made no grants in the past year.

At the same time, proponents argue that DAFs democratize philanthropy, allowing middle-class donors to give strategically rather than impulsively. Community foundations that sponsor DAFs often provide guidance that helps donors give more thoughtfully.

For nonprofits navigating this landscape, the key is building relationships with DAF sponsors and making it easy for donors to recommend grants from their accounts. Platforms like Fidelity Charitable and Schwab Charitable now process millions of grant recommendations annually — and nonprofits that are registered and visible on these platforms are better positioned to receive them.

The policy debate around DAFs — including proposed payout minimums — will be worth watching closely in the coming years.