Glossary
Revenue & Donations

Donor Advised Fund

By: Alec Hollingsworth
Updated:  
June 2, 2025

DEFINITION:

A Donor Advised Fund is a charitable account that lets donors make contributions and recommend grants to nonprofits over time.
A Donor Advised Fund (DAF) is a charitable giving vehicle administered by a public charity, allowing donors to make a charitable contribution, receive an immediate tax benefit, and then recommend grants from the fund over time to nonprofits. The donor contributes cash, securities, or other assets to the DAF, which holds and invests the assets. The donor retains advisory privileges regarding the distribution of funds, but the sponsoring organization has legal control. DAFs are popular for their flexibility and administrative convenience, enabling donors to plan their giving strategically and support multiple nonprofits over time without managing the administrative details directly.

Key Takeaways

  • DAFs let donors recommend grants to nonprofits over time
  • Contributions are tax-deductible when made to the DAF
  • Sponsoring charities control fund distributions
  • DAFs simplify charitable giving and recordkeeping

Why It Matters

DAFs provide nonprofits with a potential funding source and simplify giving for donors.

Real World Example

Jane wants to support several local nonprofits but prefers to make one large donation and allocate funds over several years. She sets up a Donor Advised Fund with a community foundation, donating appreciated stock. Jane receives an immediate tax deduction and avoids capital gains tax. Over the next few years, she recommends grants from her DAF to her favorite food bank, animal shelter, and youth program. The foundation manages the investments and handles all recordkeeping, while Jane enjoys the flexibility to plan her giving and maximize her charitable impact.

How Aplos Helps

Aplos supports organizations in tracking donations from Donor Advised Funds, ensuring accurate fund accounting and donor management. With Aplos, nonprofits can easily record DAF contributions, properly acknowledge donors, and maintain compliance with reporting requirements.
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Frequently Asked Questions

What is a Donor Advised Fund?

A Donor Advised Fund is a charitable account where donors make contributions and recommend grants to nonprofits over time.

How does a DAF benefit nonprofits?

Nonprofits can receive grants from DAFs, providing a flexible and often substantial funding source.

Can donors control which nonprofits receive grants from their DAF?

Donors can recommend grants, but the sponsoring charity has legal control over fund distributions.

Are contributions to a DAF tax-deductible?

Yes, donors receive a tax deduction when they make a contribution to the DAF, not when grants are distributed.

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