The State of DAFs in 2025: Updates on Donor-Advised Funds

Donor-advised funds, or DAFs, have been in the news for a while now. These charitable giving accounts, which are established by individual donors but managed by sponsoring organizations, have historically been a source of excitement for nonprofits. DAFs incentivize wealthy donors to give more without creating their own foundations, providing new opportunities for nonprofits to receive large donations. 

However, DAFs have been under increased scrutiny lately, and your organization may wonder what to make of them at this point in time. Are DAFs still popular, or are they too controversial now? Should your nonprofit still target DAF holders and accept donationsfrom them?

If you have similar questions, you’ve come to the right place. Let’s take a look at the latest updates on DAFs and what these changes might mean for your nonprofit.

In 2023, funding from DAF accounts made up almost 9.8% of all U.S. charitable giving. Clearly, these giving vehicles are a popular way for major donors to contribute to their favorite causes and organizations. But to get the full picture of where DAFs stand today, we need to dive deeper into the latest reports.

NPTrust’s 2024 DAF Report and The Chronicle of Philanthropy analyzed 2023’s giving data to report that:

• In total, DAFs in the United States hold an estimated $251.52 billion in assets.
• The average DAF account holds about $141,120.
• The number of DAF accounts increased by 0.6%, totaling 1,782,281 open accounts.
• Grants from DAFs to nonprofits declined somewhat, going from $55.53 billion in 2022 to $54.77 billion in 2023.
• The average DAF payout rate (the percentage of “grants made relative to the charitable assets available”) was almost 24%.
• The total combined assets in DAFs and foundations is projected to reach $2 trillion by 2026 and account for half of all individual charitable donations by 2028.

Nonprofit takeaway: Even though grants from DAFs declined in the last year, there are still billions of dollars of donations available in these accounts. 

With this funding available, securing DAF grants has become a staple of smart nonprofit cash management. Along with keeping steady reserve funds and working with the right financial advisors, diversifying your organization’s revenue streams to include DAFs is essential.

Since DAFs remain popular, they’ve naturally been met with national attention and debate. In particular, many believe that DAFs need more regulation to ensure their funding actually goes toward nonprofits instead of sitting in bank accounts for years, only benefitting the donors and DAF sponsors.

In late 2023, the IRS and U.S. Treasury Department introduced proposed regulations to address some concerns surrounding DAFs. These include:

• Updated definitions: Changes to the definitions of “DAFs,” “donor-advisors,” and “distributions” aim to ensure that more DAF funding goes directly to charities rather than personal investment advisors or administrative costs.

• Taxable distributions: The new regulation would classify any distributions from DAFs to non-501(c)(3)s as taxable distributions, subject to a 20% excise tax for sponsors. This includes payments to accountants, attorneys, vendors, etc.

• Anti-abuse rules: These provisions aim to prevent donors or advisors from having excess control over DAF funds after they’re granted to an organization. For instance, a donor cannot recommend a distribution from their DAF and then ask the grantee to re-grant the funds to someone else.

The IRS held a hearing in May 2024 to hear public comments on the proposed legislation, which was largely met with backlash from DAF-sponsoring organizations like banks and community foundations. As of December 2024, the IRS has yet to announce a decision, publish a finalized proposal, or implement any of the proposed regulations, so the 2006 rules remain in place.

Nonprofit takeaway: Though DAFs are facing some legal debate, no new regulations have been put in place yet and nonprofits remain unaffected.

1. All eyes are on DAF sponsors—not nonprofits or donors.

When it comes to the legal debate surrounding DAFs, most people focus on DAF-sponsoring organizations and their role in managing and distributing DAF funds.

According to a recent op-ed, big-name sponsors like Fidelity, Vanguard, and Schwab manage large numbers of DAF accounts and collect fees without incentives to actually make charitable distributions. That’s where many people believe regulations should focus—not on aspects of DAF giving that directly impact donors or nonprofits. Additionally, it’s the DAF sponsors who are advocating against the proposed reform. These organizations have spent millions lobbying against DAF reform aimed at helping nonprofits receive more DAF funding. 

This means that the negative attention isn’t on nonprofits. By promoting and accepting donations from DAFs, your nonprofit simply encourages individual donors to do what DAFs were designed to do: give to charitable causes.

2. It’s crucial to remind donors to request grants.

One of the biggest concerns sparking the conversation around DAF regulation is that there’s currently no DAF payout requirement. The public, lawmakers, and nonprofits alike are concerned that money can sit in DAFs for too long without any incentive to distribute the funds to nonprofits. 

But until (and if) DAF payout regulations change, it’s up to nonprofits to encourage DAF holders to distribute their funds. To encourage your donors to request grants from their DAF accounts, you can:

• Send periodic emails reminding donors to request DAF grants.
• Add a DAF widget to your nonprofit’s tech toolkit. Infinite Giving explains that this tool makes requesting grants easier and more convenient for donors.
• Engage donors you know are DAF holders regularly to further their connections to your cause.

Beyond inspiring DAF grant requests, these strategies can also help you boost donor retention, particularly among donors with high giving capacities.

3. Non-cash giving remains a lucrative fundraising opportunity. 

Finally, the sustained popularity of DAFs suggests that non-traditional and non-cash giving methods are here to stay in the nonprofit sector. Along with DAFs, these include stocks, cryptocurrency, and QCDs (qualified charitable distributions from an IRA). Tap into these opportunities by building the infrastructure needed to accept these donations and simplify the donation process.

Typically, this means opening a brokerage account and/or crypto wallet for your nonprofit and investing in a tool that makes non-cash giving easy. Then, promote non-cash giving opportunities widely. Advertise them on your website, donation page, social media, and other donor communications to spread the word.

Just like the charitable giving landscape, the world of DAFs is ever-changing. Keep an eye on future developments surrounding DAF legislation, but stay focused on what matters most to your organization: raising funds and furthering your mission.

Karen Houghton is the CEO of Infinite Giving and a Nonprofit Investment Advisor. Karen leverages her deep nonprofit, executive, and board expertise to bring an award-winning cash management experience to nonprofits all over the US. She advocates for organizational sustainability through better financial management, strategic, affordable access to curated investments, and increased giving through streamlined asset donations.

Infinite Giving has been recognized for World Changing Software by Fast Company and as one of the Top 40 Most Innovative Companies in Georgia. Karen has received WIT’s Woman of the Year Award and was listed as one of Salesforce’s 10 Small Business Women Who Inspire in 2019.