Donor Advised Funds (DAF) have been in the news quite a bit recently. Since the pandemic began, the contributions to funds and the output of dollars from funds to organizations have both been breaking records. There is even a new movement spurred by philanthropists to encourage others to give more of their balances called “Half My DAF.”
Donor Advised Funds function a bit like a bank or brokerage account but the funds can only be used to support qualified nonprofit organizations. When a donor or family decides to create a DAF, they select a sponsorship organization (Vanguard, Schwab) and then transfer funds (cash, stock, etc.) into an account there. At this point they have made a tax-deductible donation to the sponsorship organization. Those funds no longer legally belong to the donor. They receive a tax letter from the sponsoring organization, which is why your organization does not send one if you are a recipient of a grant.
From there the donor has access to make additional contributions to increase the size of their DAF account and to “recommend grants” to organizations they want to support. Typically within the sites of each sponsorship organization there are tools that help DAF account holders research organizations, review 990s, and discover organizations that connect with their philanthropic interests.
Since the start of the pandemic, DAF sponsorship organizations have increased their communications to donors to encourage distribution of funds since the increased need among organizations is quite apparent. Reports show that many donors have chosen to be very generous with their recommended grants in the last five months. And, thanks to stock market growth, the balance of these funds are also growing.