What is a Donor-Advised Fund?

Since launching Daffy in 2021, we've become one of the fastest-growing donor-advised fund (DAF) sponsors in the U.S. Today, we serve people contributing a few hundred dollars a year and people with over $50 million set aside for charity.

Along the way, we’ve heard DAFs described many different ways:

• “A tax-advantaged account for charitable giving.”
• “A smarter way to donate and save on taxes.”
• “A 401(k) for giving.”

All of the above is true, but since donor-advised funds to date have been a financial tool only available to the ultra-wealthy, many people are just learning about them for the first time. But don’t worry, we will give you the scoop.

So What Is a Donor-Advised Fund?

A donor-advised fund (or DAF) is a tax-deductible financial account for the sole purpose of charitable giving.

You contribute money or assets, receive an immediate tax deduction, your money can grow tax‑free, and you donate to nonprofits whenever you’re ready.

It separates the tax decision from the giving decision, which means more flexibility, better tax efficiency, and a much better system for long‑term generosity.

Think less “random donations,” more giving infrastructure.

How Does a Donor-Advised Fund Work?

A DAF is built around three simple steps: contribute, invest, and donate.

1. Contribute: You open a DAF with a sponsoring organization like Daffy and make a contribution. You can contribute cash, stocks, ETFs, mutual funds, cryptocurrency, or other appreciated assets. The moment you contribute, you receive an immediate tax deduction for the full fair market value, even if you haven’t chosen which charities to support yet.
2. Invest: Your contributions can be invested in a range of portfolio options. Any investment growth happens tax-free, which means your charitable dollars can compound over time.
3. Donate: When you're ready, you recommend donations from your fund to nearly any IRS-qualified public charity, including schools, religious institutions, and community organizations. There's no deadline to distribute the money, so you can give on your own schedule, whether that's the same week you contribute or years later.

Why Use a DAF Instead of Giving Directly?

If you already give to charity, a DAF helps you give more efficiently, more strategically, and with way less friction. Here’s why DAFs are growing in popularity across the U.S.:

One Place for All Your Giving: A DAF puts all of your giving into one account, so you can set up recurring donations and automate your support for the organizations you give to regularly. Instead of tracking dozens of separate receipts from different charities throughout the year, you get a single tax receipt when you contribute to your fund. Daffy makes your tax summary available at any time, which simplifies your record-keeping at tax time. Plus, with Daffy, you can add your partner or other family members to your account, so all your family giving is under one roof.

Get an Immediate Tax Deduction and Donate Any Time: When you contribute to a DAF, you lock in a tax deduction for that year, regardless of when you actually send the money to a charity. This separation of the tax event from the charitable act gives you the flexibility to be thoughtful about where your money goes without rushing to meet a year-end deadline.For example, you could contribute $10,000 to your DAF in December, claim the deduction on this year's taxes, and then take your time researching and supporting nonprofits over the next several months or even years. For a deeper look at how charitable tax deductions work, see Daffy's Charitable Tax Deductions Guide.

Donate Appreciated Assets and Skip Capital Gains: One of the most powerful DAF strategies is donating appreciated stocks, ETFs, or crypto instead of cash. When you donate an asset that has gone up in value, you avoid paying capital gains tax on the appreciation and you get a tax deduction for the full fair market value.

Here's a simple example. Say you bought stock for $5,000 and it's now worth $15,000. If you sell it, you'd owe capital gains tax on the $10,000 gain. But if you contribute that stock directly to your DAF, you skip the capital gains tax entirely and receive a deduction for the full $15,000. More money goes to charity, and less goes to the IRS. Learn more about how to donate stock and save on taxes.

Bunch Donations in High-Income Years to Maximize Deductions: "Bunching" is a strategy where you combine multiple years' worth of charitable giving into a single year. Instead of donating $5,000 every year, you might contribute $15,000 to your DAF in one year and donate from the fund over the next three years. This lets you itemize your deductions in the year you contribute (when the total exceeds the standard deduction) and take the standard deduction in the other years. The One Big Beautiful Bill Act (OBBBA) introduced a new 0.5% AGI floor on itemized charitable deductions beginning in 2026. These changes make bunching more valuable than ever. Read more about how the OBBBA affects charitable deductions.

A Lower Barrier Than a Private Foundation: If you want more structure and flexibility for your giving, but don't want the complexity of a private foundation, a DAF is a great option. Private foundations require legal setup, ongoing compliance, annual tax filings, a mandatory 5% annual distribution, and significant administrative overhead. A DAF gives you many of the same benefits — tax-advantaged giving, investment growth, and the ability to involve your family — without any of the hassle. DAFs also offer more favorable tax treatment. You can deduct up to 60% of your AGI for cash contributions to a DAF (versus 30% for a private foundation) and up to 30% for appreciated assets (versus 20% for a private foundation). Learn more about donor-advised funds vs. private foundations.

What Are the Downsides of a Donor-Advised Fund?

At Daffy, we believe anyone who gives regularly should have a DAF — but like all financial tools, DAFs do have some limitations worth understanding.

• Contributions are irrevocable. Once you put money into a DAF, you can't take it back. The funds are legally owned by the sponsoring organization and must go to charity.
• You don't get a second tax deduction when you donate. The tax benefit happens when you contribute to your DAF, not when the money goes to your recommended charity. This is by design, but it means you need to plan your contributions with your tax situation in mind.
• Fees matter. Fee structures vary widely between DAF providers, so it's worth comparing carefully (more on this below) and using our free DAF fee calculator to see how fees compare across providers.

Is a Donor-Advised Fund Right for Me?

A DAF tends to be most valuable if you meet a few criteria:

• You want to simplify and organize your giving. If you support multiple charities throughout the year, a DAF consolidates everything into one account with one tax receipt and an easy way to track your giving history.
• You donate cash or appreciated assets regularly. If you're already giving to charity, a DAF helps you do it more tax-efficiently, especially if you have appreciated stocks, crypto, or other assets that have grown in value.
• You itemize your deductions (or plan to). The major tax benefit of a DAF — the upfront deduction — only kicks in when you itemize. For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly. If your total itemized deductions (including charitable contributions, mortgage interest, state and local taxes, etc.) exceed the standard deduction, a DAF can amplify your tax savings.
• You want flexibility in timing. A DAF lets you separate the financial decision (when to contribute for tax purposes) from the charitable decision (when and where to donate), giving you more control over both. Even if you take the standard deduction most years, a DAF can still make sense if you use a bunching strategy — making a larger contribution every two or three years to push yourself above the standard deduction threshold, then donating from your fund in the interim years.

How Much Does It Cost to Open a Donor-Advised Fund?

The cost of a DAF depends on the provider you choose, and fee structures can vary significantly.

What Are the Types of Fees and Minimums?

When evaluating a DAF, there are several costs to look out for:

• Administrative fee. This is the core fee charged by the DAF provider for managing your account, processing donations, and providing donor services. It's typically expressed as an annual percentage of your account balance (often around 0.60%). Unlike most DAFs, Daffy charges a flat monthly membership, starting at just $3/mo.
• Investment fee. These are the expense ratios of the underlying investment options (mutual funds, ETFs, etc.) in which your DAF balance is invested. They're usually in the range of 0.05% to 0.50% depending on the portfolio you select.
• Account minimum. Some providers require a minimum initial contribution to open a DAF, which can range from $5,000 to $25,000. Daffy has no minimum to open an account.
• Donation minimum. Each provider sets a minimum donation amount: the smallest donation you can make from your fund to a charity. This can range from as low as $50 to $500. Daffy’s is $18.

What Are the Types of DAFs and Their Fee Structure?

DAF providers generally fall into three categories:

• Financial institution DAFs (e.g., Fidelity Charitable, DAFGiving360 (formerly Schwab Charitable), Vanguard Charitable) are affiliated with large brokerages. They typically charge an administrative fee of around 0.60% of assets annually, with tiered reductions for larger balances. Fidelity and Schwab have no minimum to open an account, while Vanguard requires a $25,000 minimum. Minimum grants range from $50 (Fidelity, Schwab) to $500 (Vanguard). These providers offer a range of investment pools, but your options are generally limited to their pre-built portfolios.
• Community foundation DAFs are run by local or regional community foundations. They often focus on local giving and may offer personalized philanthropic advice. Fees and minimums vary, but administrative fees can be higher (0.75% to 1.5% or more), and initial contribution minimums can range from $5,000 to $25,000.
• Religious or cause-specific DAFs (e.g., National Christian Foundation, Jewish Communal Fund) are designed to serve donors within a specific faith tradition or cause area. They may offer values-aligned investment options, specialized guidance on faith-based giving, and connections to organizations within their community. Fee structures vary but are generally comparable to community foundations, and some may have restrictions on which types of organizations you can support.

Daffy brings the best of modern technology, design, and financial services to the donor-advised fund experience. Members can choose from 17 pre-approved, expertly crafted portfolios, or request a custom portfolio tailored to their investment goals and giving timeline. Options include Conservative, Standard, and ESG portfolios built with high-quality, low-cost index funds from Vanguard, Schwab, and BlackRock, as well as crypto portfolios featuring pure crypto custody at Coinbase and diversified crypto exposure through Bitwise.

All of this is delivered through a model designed for accessibility and transparency. Instead of charging a percentage of assets, Daffy uses a flat monthly membership starting at just $3/month, so costs don’t scale as your balance grows — meaning more of your money goes to the causes you care about. There are no account minimums, no hidden fees, and no investment management fees beyond the standard expense ratios of the underlying funds. For a detailed side-by-side comparison, visit Daffy's Compare page.

Common Questions About Donor-Advised Funds

Can I Use a DAF If I Take the Standard Deduction?

Yes! You can absolutely open and use a DAF even if you currently take the standard deduction. The account itself doesn’t require itemizing, but you’ll only receive a charitable tax deduction in years when you do itemize.

This is where bunching is especially useful. Instead of giving smaller amounts annually, you contribute a larger amount to your DAF every few years. In those years, your itemized deductions exceed the standard deduction, and you can claim the charitable deduction. In the off years, you take the standard deduction and continue giving from your DAF balance.

Starting in 2026, standard deduction filers will also be able to deduct up to $1,000 in cash charitable contributions ($2,000 for joint filers). This does not apply to DAF contributions or private foundations.

Are DAF Contributions Reversible?

No. DAF contributions are irrevocable. Once you contribute cash, stock, or other assets, they belong to the sponsoring organization and are permanently designated for charitable use. You can’t withdraw the funds for personal use, but you retain advisory privileges, meaning you recommend which charities receive donations and when.

Is There a Deadline to Distribute DAF Money?

No. Unlike private foundations, which must distribute at least 5% annually, DAFs have no mandatory payout timeline. You can let your funds grow and give on your own schedule.

That said, DAFs are meant to move money to charities. At Daffy, we are proud to share that our donation payout rate exceeds 55%, more than double the industry average of 25% reported in the DAF Research Collaborative’s 2025 Annual DAF Report. In practical terms: for every dollar Daffy members set aside in 2024, more than half was distributed to charity in 2025.

Can I Donate Anonymously Through a DAF?

Yes. Most DAF providers allow anonymous giving. When you choose this option, the charity receives the donation in the provider’s name (e.g., “Daffy Charitable Fund”) rather than yours. If you want to make a specific donation or all donations anonymous, read our guide.

What Happens to My Donor-Advised Fund When I Die?

Most providers allow you to name successor advisors or beneficiary organizations. A successor advisor (often a spouse, child, or trusted individual) can continue recommending grants. If you name beneficiary organizations, the remaining balance is distributed directly to those charities.

If no designation is made, the sponsoring organization will distribute the funds according to its charitable mission. Setting up your succession plan ensures your giving legacy reflects your intentions. Here’s how to set this up on Daffy.