What is a donor-advised fund?

Frequently asked questions

• Donor-advised fund vs. giving directly: what's the difference?

  Giving directly requires you to answer two questions at once: How much can I afford to give? and which charities should receive it? Your donation goes immediately to the organizations you choose.

  A donor-advised fund (DAF) separates those decisions. First, you make an irrevocable contribution to your DAF and may qualify for a charitable tax deduction in that year. Then, you can recommend donations to eligible charities whenever you’re ready. In the meantime, the funds can be invested for potential tax-free growth, and all your contribution and donation records stay organized in one place.

  At Daffy, we believe this separation solves two of the hardest problems in giving: how much to set aside, and where it should go. Like contributing to a 401(k) or 529 plan, Daffy lets you build giving into your financial life — set a goal and budget, then automate contributions one-time, weekly, or monthly. Setting a giving goal can increase charitable giving by an average of 32%, helping close the gap between how generous people want to be and how much they actually give. Read Daffy’s Generosity Gap research.

• What are the pros and cons of a DAF?

  A donor-advised fund can make giving more tax-efficient, organized, and intentional. Potential benefits include:

  • An immediate charitable deduction when you contribute, subject to applicable tax rules
  • The ability to donate appreciated assets without first realizing capital gains
  • Potential tax-free growth of the charitable funds
  • The flexibility to contribute now and recommend donations to eligible charities over time
  • One place to manage your charitable funds, donations, and tax receipts

  With Daffy, members can also set annual giving goals, automate contributions and donations, involve family members, and contribute assets such as stock, crypto, and private shares. These tools are designed to turn good intentions into a lasting giving practice. On average, Daffy members donated 2.5x more since the quarter when they started.

  The main tradeoff is that contributions to a DAF are irrevocable. Once contributed, the assets must be used for charitable purposes. The sponsoring organization retains legal control, while you recommend how the funds are invested and distributed. Donations are generally limited to eligible charities, and fees, minimums, investment options, and donation policies vary by provider. Compare Daffy with other DAF providers to find the right fit for your giving.

• How much does a DAF cost?

  DAF costs vary by provider. Many providers charge an annual administrative fee based on your account balance, commonly starting at 0.60%, plus expenses associated with your selected investments. Some also impose minimum annual fees of $100 or more. Opening minimums vary widely: some providers have no minimum, while others require $5,000 to $25,000.

  Daffy charges a flat membership fee starting at $3 per month, with no minimum required to open an account. Compare Daffy’s pricing with other DAF providers.

• What can I donate to a DAF?

  Most DAFs accept cash and publicly traded securities, including stocks, ETFs, and mutual funds. Acceptance of more complex assets, such as cryptocurrency and private company shares, varies by provider.

  Daffy accepts cash through bank accounts, debit and credit cards, and Apple Pay, as well as publicly traded stocks, ETFs, mutual funds, private company shares, and more than 300 cryptocurrencies. You can also transfer funds from an existing DAF.

• Can I hold donated stock instead of selling it right away?

  Policies vary by DAF provider, but the vast majority of providers sell publicly traded securities shortly after receiving them.

  With Daffy, members can recommend that contributed shares be held for a period of time, sold gradually, or sold immediately. This provides members greater flexibility to align the liquidation of donated stock with their charitable plans.

• Can I customize how my DAF is invested?

  Most DAF providers offer a standard menu of pre-built investment portfolios. Custom investment options are less common and often require a high account minimum or management by a financial advisor.

  Daffy offers 17 pre-built portfolios across Conservative, Standard, ESG, and Crypto investment strategies. Members can also build their own custom portfolio using more than 680+ ETFs and 2,200+ individual stocks, without requiring an advisor.

• Can I donate private or pre-IPO stock to a DAF?

  Yes. Donating appreciated private stock directly — rather than selling it and donating the cash — can be a tax-efficient way to give, particularly before a tender offer, secondary sale, or IPO. If the shares have been held for more than one year, you may avoid capital gains tax on their appreciation and qualify for a charitable deduction based on fair market value.

  Some donor-advised funds accept private company shares, but many providers lack the operational capacity to evaluate and process these assets.

  Daffy accepts eligible private and pre-IPO shares directly from individual shareholders and also partners with companies to make private stock giving available to employees at scale. To discuss your shares, contact privatestock@daffy.org.

• Which charities can I donate to using a DAF?

  The charities you can support depend on your DAF provider. Some providers apply donation criteria based on their mission. For example, a community foundation may require that some grants support its local area, while a faith-based DAF may limit grants to organizations aligned with its religious values.

  With Daffy, you can recommend donations to nearly any registered 501(c)(3) public charity in good standing with the IRS — more than 1.7 million organizations nationwide. That includes local nonprofits, schools, national organizations, churches, synagogues, and other houses of worship.

  Under IRS rules, DAF funds cannot be used to support political campaigns or PACs, contribute to personal or for-profit crowdfunding campaigns, or receive anything of value in return, such as gala tickets, auction items, or membership benefits with tangible value.

• Can I make anonymous donations through a DAF?

  Yes. Most DAF providers allow you to recommend donations anonymously, although the privacy options vary.

  With Daffy, you control what information you share with the charity. You can share your name and contact information, share your name only, or remain completely anonymous. You can also set a default privacy preference for all future donations.

• Donor-advised fund vs. private foundation: Which is better?

  A donor-advised fund offers many of the benefits of a private foundation with less cost and administration. A private foundation is a separate legal entity that can cost around $15,000 to establish and is generally recommended only when substantial initial funding — often $250,000 or more — justifies the expense. It also requires ongoing governance, public tax filings, legal and accounting support, and annual charitable distributions generally equal to about 5% of its assets.

  A DAF is typically faster and less expensive to open, requires no separate tax return from the donor, and generally offers higher charitable deduction limits. You can recommend donations and investments while the DAF provider handles compliance, recordkeeping, and administration.

  A private foundation may be a better fit if you want greater control over investments, grantmaking, staffing, and governance; plan to run your own charitable programs; or want to establish a formal philanthropic institution for future generations. For most donors who primarily want to support charities efficiently, a DAF is the simpler option.

  The two are not mutually exclusive. Some Daffy members use both a private foundation and a DAF, giving them the control of a foundation alongside the convenience and flexibility of a donor-advised fund. Read our blog for a detailed comparison.

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