Soapbox Engage Blog

There’s always something new going on in the nonprofit sector. But even with exciting new trends cropping up (like the use of AI and influencer marketing), don’t forget about the most impactful nonprofit trends of the past few years. This includes donor-advised funds (DAFs)—a valuable opportunity for securing large donations and improving your organization’s cash management strategies.

But you may be wondering: Are DAFs really still relevant today? Should you be pursuing them even if they get some negative press? The answer to both of these questions is a resounding yes. Let’s explore why.

Table of Contents

• What are donor-advised funds (DAFs)?
• The state of DAF giving in 2024
• How to tap into donor-advised funds as a nonprofit

What are donor-advised funds (DAFs)?

Donor-advised funds are dedicated charitable giving accounts opened by individual donors at a DAF-sponsoring organization (such as a public charity or community foundation like Fidelity Charitable). The organization manages the fund, while the original donor serves as an “advisor” by suggesting that grants from the fund go to specific nonprofits or causes.

The appeal of DAFs lies in a few core benefits for donors:

• Potential for growth: By setting aside funds for future giving, DAF holders give their money a chance to grow before they donate. A $1,000 contribution added to the DAF now may become a $5,000 donation to your nonprofit in a few years.


• Tax efficiency: Donors can claim tax deductions on any funds they contribute to their DAF, even if they don’t donate that money to a nonprofit that year. This incentivizes donors to continue building their DAFs, leading to larger donations to nonprofits in the future.


• Impact on multiple nonprofits: Donors can grant DAF funds to many different causes over time. Compared to legacy giving, in which donors often make a sizeable gift to a single nonprofit after they pass, DAFs enable donors to make a greater impact on several organizations during their lifetimes.

For nonprofits, these funds represent a major opportunity to secure future funding. DAF-holders are committed to long-term charitable giving, meaning your organization can receive significant donations from these funds over time.

The state of DAF giving in 2024

Now that you know the basics, let’s explore what DAFs look like today for donors, nonprofits, and regulators.

Ever-growing industry

The DAF industry is not slowing down any time soon. According to the latest DAF report from the National Philanthropic Trust, there are almost $230 billion held in DAF accounts.

Both contributions (money that donors add to their funds) and grants (money that donors give to nonprofits from DAFs) increased by 9% in 2022, totaling $52 billion in donations to nonprofits. The report explains: “Grantmaking has increased every year since 2009 and has more than doubled in the past five years.” Overall, this represents a major opportunity for nonprofits, now and in the future as these funds continue to grow.

Focus on major donors

By this point, every nonprofit is aware of the economic ramifications donors are facing and the overall decrease in giving. However, Double the Donation’s nonprofit trends report explains that while the total number of nonprofit donors is dropping, organizations have seen an increase in major giving and are therefore shifting more focus to these donors.

Major donors are more important than ever—and they want tax-efficient ways to give. Your highest capacity donors want to make large gifts more effectively, such as through stock donations, cryptocurrency, and, you guessed it, DAFs! By prioritizing DAFs and other non-cash giving methods, your nonprofit can better engage and retain major donors long-term.

Potential new regulations

As DAFs gain more popularity, they naturally draw more attention from the media and regulatory bodies, both positive and negative. Recently, the conversation has turned to concerns about the lack of transparency and payout requirements for DAFs. Some are afraid that too much money sits in DAFs instead of going to nonprofits, while others fear that DAFs serve sponsors’ interests more than nonprofits’.

Due to these concerns, the IRS proposed a new set of DAF regulations in November 2023, which includes:

• Clarification on the definition of DAFs and how taxes apply to them.
• Classifying single-entity funds (funds that only give to one nonprofit) as DAFs.
• Penalties for DAFs used to support lobbying or individual people.
• Defining DAF holders’ financial advisors as additional DAF advisors (meaning donors can’t pay their financial advisors with investment funds).

The main goal of these new regulations is to ensure that DAFs do what they’re supposed to do—give to nonprofits. These rules largely impact DAF-sponsoring organizations, not the nonprofits that receive grants.

How to tap into donor-advised funds as a nonprofit

Since DAFs aren’t going anywhere, how should your nonprofit tap into their potential? How do you get a piece of that $230 billion currently sitting in DAFs across the country?

Start by taking the following steps:

1. Use a DAF widget to simplify the giving process. The biggest barrier for DAF holders when it comes to giving is complex processes. Make it easier for them by adding a DAF widget to your donation page, which Infinite Giving defines as an intuitive tool that “provides [donors] with immediate information on the actions they need to take to give.”


2. Promote the opportunity to donors. Next, advertise how easy it is for donors to request DAF grants for your nonprofit. Create infographics, social media posts, and a page on your website that promotes this opportunity and why donors should consider DAF giving. You might even add information about how donors can open a DAF if they don’t already have one.


3. Use prospect research to identify potential DAF holders. Identify high-capacity donors who you can reach out to about DAFs personally. Use prospect research to find donors with the financial capacity and dedication to giving that indicates they may have a DAF.


4. Steward DAF donors to encourage more donations in the future. Once you secure a DAF grant donation, keep in touch with the donor to strengthen and retain that relationship. Share impact updates, engagement opportunities, and your appreciation to increase the chances they give from their DAF again.

Remember that many DAF holders need reminders to request grants from their DAF, so don’t be afraid to follow up with personalized fundraising appeals.

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Tapping into DAFs is not only a major fundraising opportunity for your nonprofit, but it’s also a great way to start growing your organization’s financial sustainability. By diversifying your revenue sources and building relationships with high-capacity donors, you’ll open the door for better cash management practices that lead to continued financial growth.