Are DAFs A Giving Vehicle Staying in Park?
Donor-advised funds (DAFs) have exploded in popularity over the last decade, quickly becoming one of the fastest-growing vehicles for charitable giving. Donors love them for their flexibility, potential investment growth, and tax advantages, especially the ability to “bundle” gifts in a single year to exceed the standard deduction when filing taxes.
While these benefits are undeniable, there’s a growing concern in the nonprofit and even government sector: many of these philanthropic vehicles aren’t going anywhere.
In too many cases, DAFs are functioning more like savings accounts than checking accounts. Donors contribute funds, receive immediate tax benefits, and then let the assets sit (sometimes for years) without making distributions to the causes they care about. While the investment revenue generated in these accounts is perfectly legal and belongs to the donor for charitable purposes, the reality for nonprofits is a challenging situation: if the funds aren’t moving, neither is your mission.
The Growing “Parked Money” Problem
Recent data highlights just how widespread this issue is:
- The Chronicle of Philanthropy reported that in 2020, about 35% of DAF accounts made no distributions at all, and more than half distributed less than 5% of their assets. This raises real concerns about charitable dollars being withheld from active use.
- Forbes found that 22% of DAFs didn’t distribute any grants from 2019–2022, demonstrating that this trend wasn’t just a pandemic outlier.
- A separate Forbes article from 2016 drew on behavioral economics research to explain the “endowment effect” in DAFs—once donors place money into their account, they still feel a sense of ownership, making them reluctant to part with it.
- Inequality.org points out that, unlike private foundations, DAFs have no legal minimum payout requirement. This means contributions can sit for as little or as long as the donor chooses, generating returns without moving toward active charitable programs.
For nonprofits, this translates to missed opportunities and delayed impact, especially when the total balance of DAFs nationwide is in the hundreds of billions of dollars. While donors may end up using this money to make larger gifts, the stagnancy can sometimes make or break an organization.
Why This Matters for Fundraisers
The growth of DAFs is both a challenge and an opportunity. On one hand, fundraisers can trust that the funds in a DAF wil be used to support causes the donor cares about. On the other hand, if donors aren’t prompted, educated, and inspired, those funds may sit untouched for years. However, it is important to remember that ultimately the flexibility remains in place to support the DAF holder’s passions and impact.
Despite this “parked” vehicle, through engagement and education, fundraisers can take measures to encourage both short and long-term philanthropy through DAFs.
Four Strategies to Activate DAF Giving
1. Identify your DAF holders
Start by asking the question directly in emails, social media posts, surveys, and personal conversations: “Do you have a donor-advised fund?” Keep this list separate in your database or add a flag to constituent records so you can easily find and target these donors in future outreach.
2. Track past DAF giving
Look for clues in your gift processing records. Many DAF grants are distributed through banks, community foundations, or financial service companies like Fidelity Charitable or Schwab Charitable. If a check arrives from one of these sources, it likely came from a DAF. Make note of these gifts and build a profile of your existing DAF donors.
3. Create DAF-specific appeals
Send targeted letters, emails, and social posts encouraging donors to give from their DAFs. Even if you aren’t sure whether a supporter has one, this direct ask may inspire interest and action. Provide clear instructions, such as the name and address your organization is likely to be listed under in lists of organizations available to receive DAF grants, and highlight that giving through a DAF can be as simple as logging into an online portal and clicking a few buttons. More than anything, stress the importance of having an impact now.
4. Keep DAFs top-of-mind year-round
Don’t limit DAF outreach to year-end appeals. Consider adding a reminder to newsletters, event programs, and your website. Use consistent language like, “If you have a donor-advised fund, you can recommend a grant to [Organization Name] at any time.” The more often donors see this, the more likely they are to take action. Particularly highlight your most urgent, short-term needs.
Framing the Conversation with Donors
When encouraging DAF giving, storytelling is still key. Many donors don’t realize how much their more immediate gifts matter, especially if they assume nonprofits have steady funding from other sources (and this is a blameless assumption, without the proper education). When communicating with DAF holders or potential DAF holders:
- Share specific, tangible outcomes their gift could make possible right now.
- Position the gift as a way to accelerate their impact, rather than simply fulfill a charitable obligation.
- Reassure them that gifts from a DAF can be made quickly and conveniently, often in less than five minutes online.
- Highlight the legacy that impactful, current-need action creates.
By framing DAF giving as an immediate opportunity to live out their philanthropic values, you help donors see the urgency in acting today rather than someday.
The Bottom Line
Donor-advised funds aren’t going away – they’re growing. As of the latest reports, assets in DAFs exceed $200 billion nationally, representing an enormous pool of potential charitable impact, many of whom fall into high net worth categories. However, without consistent, intentional outreach, too much of that money will remain idle.
Fundraisers who learn to identify DAF holders, maintain regular contact, and craft targeted, donor-centered appeals will be best positioned to tap into this unfulfilled potential. In the end, the key is simple: don’t wait for DAF gifts to happen; invite them to happen.
