Donor-Advised Fund (DAF)
Quick Definition
A charitable giving account managed by a sponsoring organization (like Fidelity Charitable or a community foundation) where the donor gets an immediate tax deduction but recommends grants to nonprofits over time.
What Is Donor-Advised Fund (DAF)?
A donor-advised fund is like a charitable savings account. A donor contributes cash, stock, or other assets to a DAF held at a sponsoring organization — Fidelity Charitable, Schwab Charitable, Vanguard Charitable, or a local community foundation are the most common sponsors. The donor receives an immediate tax deduction for the full contribution amount, even though the money hasn't gone to any specific charity yet.
The funds sit in the DAF and can be invested and grow tax-free. When the donor is ready, they "advise" (recommend) that the sponsoring organization make a grant to a specific nonprofit. The sponsoring organization conducts a brief due diligence check (confirming the recipient is a legitimate 501(c)(3)) and then sends the money. The donor can recommend grants immediately or let the funds grow for years before distributing them.
DAFs have exploded in popularity. Fidelity Charitable is now the largest grantmaker in the United States — larger than the Gates Foundation. In 2023, DAFs held over $230 billion in assets and distributed roughly $55 billion in grants. For nonprofits, this means an increasing share of donations arrives via DAF grants rather than personal checks.
Why It Matters for Nonprofits
If you run a nonprofit, DAF grants are likely already a part of your revenue — and that share is growing every year. DAF grants come with quirks you need to understand. The check arrives from the sponsoring organization (Fidelity Charitable, not the donor personally), so if you don't know to look for it, you might not connect the grant to the right donor for acknowledgment. DAF grants cannot be used to fulfill a legally binding pledge, buy event tickets or auction items, or provide any goods or services to the donor.
On the flip side, DAFs can be great for your organization. Donors with DAFs tend to be more generous and more consistent. Suggesting DAF gifts in your fundraising appeals can increase average gift size because donors have already set aside the money for charity — you're just competing for their attention, not their wallet.
Example
A longtime supporter of your environmental nonprofit sells $100,000 in appreciated stock and contributes it to her Fidelity Charitable DAF. She gets a $100,000 tax deduction immediately and avoids capital gains tax on the stock appreciation. Over the next three years, she recommends $30,000 in annual grants from her DAF to your organization. You receive checks from "Fidelity Charitable" (not from her personally) with a letter noting her recommendation. Your development team logs each gift under her donor record, sends personalized thank-you notes, and includes DAF-friendly language in future appeals. The remaining $10,000+ in her DAF continues to grow and will fund future grants to various nonprofits.
Key Takeaways
- ✅ DAFs give donors an immediate tax deduction while allowing them to distribute grants over time
- ✅ Grants arrive from the sponsoring organization (Fidelity, Schwab, etc.), not the individual donor
- ✅ DAF grants cannot fulfill pledges or purchase event tickets or auction items for the donor
- ✅ Including DAF-friendly language in appeals can increase giving from donors who already have DAF accounts
How Holdings Helps
Holdings helps nonprofits track donations by source — so DAF grants get properly attributed to the recommending donor for stewardship and reporting.
Related Terms
In-Kind Donations
Non-cash contributions to your nonprofit — goods, services, or use of facilities — that have measurable value and must be properly recorded in your financial statements.
Endowment
A permanently invested pool of money where the principal is preserved forever and only the investment earnings are used to fund the nonprofit's work — creating a sustainable, long-term revenue stream.
Gift Acceptance Policy
A board-approved document that outlines what types of donations your nonprofit will (and won't) accept, and the procedures for evaluating non-standard gifts.
Matching Gift
A corporate program where an employer matches an employee's charitable donation — effectively doubling (or sometimes tripling) the impact of the original gift.
Public Support Test
A mathematical test that determines whether your 501(c)(3) qualifies as a public charity (broad support from many donors) or a private foundation (funded primarily by a few sources).
In-Kind Donations
Non-cash contributions to your nonprofit — goods, services, or use of facilities — that have measurable value and must be properly recorded in your financial statements.
Explore More nonprofit Terms
Browse our complete financial glossary designed specifically for nonprofits.
View All nonprofit Terms →