Business meeting, welcome handshake and couple meet with lawyer or financial advisor. Elderly married man, wife and woman retirement conversation, planning and insurance documents for estate finance

Happy DAF Day!

  • Published October 9, 2024
  • / By Penelepe C. Hunt

October 10, 2024 is the first ever DAF Day. Hallmark doesn’t have a card for it yet, but it’s a day that’s well worth celebrating for those of us in philanthropy. DAFs (Donor Advised Funds) are a powerful tool for philanthropists and the organizations they support. In honor of DAF Day, let’s take a look at what this means for you.

Donor Advised Funds are a financial tool that donors can use to manage their philanthropic activity. Here’s how it works:

  • A donor transfers funds into a Donor Advised Fund account at a financial institution (e.g., an investment company, a bank, or a community trust) or establishes a foundation.
  • The donor receives a charitable deduction for some or all of the amount they transferred, subject to tax law at the time.
  • The financial institution manages the funds in the DAF, investing them with other funds to achieve growth, like any other investment portfolio.
  • The donor, by virtue of having taken the tax advantage, no longer controls these funds. However, they can advise the financial institution on how to use the funds.
  • When the donor would like to send a contribution to a qualified charity, they advise the fund holder of their wishes, and the fund holder makes the gift.
  • The recipient organization issues a gift receipt to the fund holder, and many provide soft credit and stewardship services to the originator of the DAF.

DAF Days organizers describe it as a new kind of giving day that reframes how donor advised funds are used, and who uses them. The idea is to raise awareness about DAFs by encouraging philanthropists who already have DAFs to make a gift from them on October 10 and encouraging those who don’t have a DAF yet to establish one.

The impact of DAFs in philanthropy is enormous. As of 2022, DAFs held almost $240 billion. Compared to professional foundations, which are required to distribute 5% of their value each year, DAFs showed an average payout rate of 18%. The number of DAF donors over the last five years has increased 83%.

DAFs are for everyone. You don’t have to be wealthy to start a DAF – about half of all DAFs have assets of less than $50,000.

Most nonprofits are not aware of their own DAF potential. A recent study showed that a quarter of DAF donors were already giving to the organizations before they first used a DAF to do so. Considering the fact that DAF donors tend to make larger gifts and show higher retention rates than non-DAF donors, organizations that are not actively promoting and pursuing DAF gifts may be overlooking a significant amount of giving potential from within their established constituency.

Organizations can increase the amount they receive from DAFs  in several ways.

  • Note who in your database has a DAF. When you receive a payout from a fundholder, it will almost always include the name of the original donors. Mark that person’s record in your database so that gift officers who interact with them will be aware that they have a DAF.
  • Steward DAF donors as if they were outright givers. The gift would not have come to your organization unless the DAF donor had advised their fund holder to send it. Thank them accordingly (just be sure to send the gift receipt to the fund holder) and include them in the stewardship activities appropriate for that gift level.
  • Ask whether a prospect uses a DAF. As you are deepening your organization’s relationship with a  prospective donor, ask them about their charitable giving. Most people are happy to talk about the organizations they support. Include questions about how they make their gifts, both how they decide and what vehicles they use.
  • Promote the use of DAFs. For decades, organizations have marketed planned giving to their constituencies with great outcomes. You can do the same with DAFs. In your donor materials, tell the story of a donor who used a DAF and the impact their gift had. Reference the use of DAFs in your annual giving solicitations and donor recognition materials.

DAFs are a growing force in philanthropy. The number of funds increased by over 200% between 2019 and 2023.  That’s worth celebrating! So put your party hats on, and let’s celebrate DAF Day to its fullest!