Donor-Advised Funds (DAFs)—one of the fastest-growing ways donors are giving to charities like ours. These funds are essentially accounts donors set up to contribute cash, stocks, or even real estate, which they can then recommend for grants to organizations when they’re ready.

DAFs held more than $228 billion in assets according to the National Philanthropic Trust’s 2023 DAF Report, making them a significant resource for nonprofits to tap into.

Donors love DAFs for their flexibility and tax benefits. They get an immediate tax deduction when contributing to a DAF but can take their time deciding where to direct the money. Plus, funds can grow tax-free, often leading to larger grants down the road.

Another draw? Simplicity. Unlike private foundations, DAFs are easier to manage and don’t come with excise taxes or heavy reporting requirements.

On the upside:

• Steady Donations: DAFs can offer a reliable stream of funding. Donors might make large contributions upfront and distribute the money over years.
• Engaged Donors: People using DAFs are often strategic and thoughtful in their giving, which can lead to deeper relationships.

On the downside:

• Uncertain Timing: There’s no requirement for donors to disburse funds within a set timeframe. This means donations can get delayed, even when there’s an urgent need.
• Transparency Issues: It’s often tricky to identify DAF donors and understand what funds might be available.

Engaging DAF donors requires us to stay proactive. Building trust is key—showing impact through regular updates and tailored outreach goes a long way. Tools like CRM systems can help us track relationships, streamline grant processes, and personalize communications.

DAFs are here to stay and growing fast. While they might require us to adapt, the opportunity they present for meaningful, long-term donor partnerships is huge. Let’s work together to navigate this landscape and make sure we’re ready to maximize the impact.