Meet the Donor-Advised Funds That Are Meeting the Moment

This article is the second of a three-part series: Saving Philanthropy: Creating Rules of the Road for Donor-Advised Funds. Coproduced by the Charity Reform Initiative of the Institute for Policy Studies and NPQ, this series examines how to facilitate giving while ensuring donor funds reach operating nonprofits in an efficient and effective manner.

When have nonprofits been on thinner ice than today? Nonprofits are scrounging for donations, losing federal funding, and struggling to survive in dangerous political conditions.

Sometimes lost in the conversation are intermediaries like private foundations and donor-advised funds (DAFs). All told, these grantmaking groups steward an estimated $1.7 trillion in assets. Alas, too many of them treat federal annual giving requirements as ceilings not floors, leaving money piling up and nonprofits in the lurch.

DAFs have skyrocketed in use and prominence.…In 2008, 4 percent of all giving was to DAFs; by 2022, that had increased to 27 percent.

But this tendency is, fortunately, not universal—and some foundations and DAFs are stepping up. These field leaders are creating a path that others can follow.

Some Foundation Leaders Step Up

Several foundation leaders have identified how the confluence of political threats mean that they must invest more heavily in their embattled work. “Set it at six,” implored the MacArthur Foundation’s president, John Palfrey, raising his organization’s annual payout rate to 6 percent versus the traditional, legally mandated 5 percent. In 2024, the foundation awarded roughly $353 million in grants. MacArthur’s commitment to give out 6 percent of assets for the next two years increases their grantmaking capacity by an estimated $70 million a year.

The Freedom Together Foundation decided to pay out 10 percent of assets this year—double what federal law requires—to protect threatened partners, enable shorter-term democracy defense, and “double down on long-term strategies to get at the roots of the democracy crisis.” Meanwhile, the smaller-but-formidable Woods Fund Chicago will reach a 15 percent payout by 2026, and the Marguerite Casey Foundation is drawing down on its endowment to provide $130 million this year in new grants, a dramatic increase over prior years when grants ranged from $23 to $57 million.

What About DAFs? 

As NPQ has previously widely covered, DAFs have skyrocketed in use and prominence in the philanthropic world. In 2008, 4 percent of all giving was to DAFs; by 2022, that had increased to 27 percent.

Over the last four years, DAF assets have increased by 67 percent in value to an estimated $254 billion in 2023. It’s no wonder why. DAFs are far more loosely regulated than foundations, have no payout or transparency requirements stipulated by federal law, and they grant donors greater flexibility and autonomy to move and manage money.

Too many DAFs use this as a permission structure to nab tax advantages and rest on their laurels. But there are some DAFs that lead by example, prefiguring how the entire sector should behave and what kind of giving would be fairest for taxpayers to subsidize by law.

Here’s a look at some of the DAFs—and DAF practices—that are meeting the moment.

Giving at a Quicker Cadence

DAFs can be flexibly deployed to efficiently move capital to nonprofits that need resources. But that’s not always how they’re used.

A recent study done by our team at the Institute for Policy Studies (IPS) found that DAFs have a median payout rate of 9.7 percent. Yes, many people use DAFs to move money quickly, but a look at account-by-account activity reveals a high percentage of inactive accounts with no annual payouts. A lot of DAF money, in short, stays still.

So which groups are particularly good at accelerating donations? The gold standard are donation processors—that is, sponsors that administer mass-scale contributions—like PayPal Giving Fund, Network for Good, and American Online Giving Foundation. Donation processors have by far the highest payout rates of any sponsor type, granting out around 82 percent in any given year. (Their median payout rate was 83.6 percent in 2023.) These sponsors share the mission to swiftly direct donations from workplace giving and crowdfunding programs to charities on the ground.

DAFs don’t only give quickly by facilitating mass-scale, lower-dollar fundraising campaigns, however. Individual accounts and their sponsors can incentivize giving at a speedier pace.

The Amalgamated Foundation, for example, requires a 10 percent annual payout pledge for their DAFs account holders. Many of their account holders do more. Executive Director and CEO Anna Fink told NPQ that the average Amalgamated Foundation DAF moves 75 percent of its assets each year, far outpacing the national average. “In today’s challenging climate, it’s more critical than ever for DAFs to move money with urgency, efficiency, and accountability,” Fink added, “and for donors to partner with institutions that share those values.”

The #HalfMyDAF pledge campaign, launched by Jennifer and David Risher, encourages DAF users to act fast and give away at least half the assets sitting in their accounts. Since May 2020, the campaign reports, they’ve incentivized and encouraged $70 million in DAF gifts out the door.

And we’d be remiss not to mention MacKenzie Scott’s Yield Giving outfit, which distributes donations via several DAFs. To date, Scott’s fund has accelerated over $19 billion in donations to more than 2,000 nonprofits. It’s unclear how much money sits in the intermediaries at any given time, but assets are certainly moving through them at a pace unrivaled by most other billionaires who signed the 2010 Giving Pledge.

Giving More Transparently

Many DAFs are less than transparent. They can, for example, obscure the influence networks that fund dangerous causes with tax-benefited dollars. Research IPS conducted with Brian Mittendorf of the Ohio State University concludes that DAFs give to hate groups at 3.5 times the rate of other funding mechanisms.

But even though the law does not require it, DAFs can opt to shine a light on their own gifts. Scott’s Yield Giving publishes an itemized list of all the organizations it funds, sortable by year of grant, focus areas, geography, and key words.

The Kataly Foundation has in the past publicly listed all of their grantees in a robust database. As a self-described “spend-out” foundation, Kataly greatly relies on DAFs to facilitate their tight-timeline grantmaking—a practice that can be abused to evade foundation payout minimums, but in this case is instead used to accelerate giving and avoid duplicative and costly infrastructure. Kataly Foundation attempts to move beyond tired “prove yourself” grantmaking relationships by redistributing large, multiyear grants from the very beginning, ceding control to groups working on racial and economic justice.

Of course, transparency is only viable in a regulatory ecosystem that doesn’t target nonprofits or funders for their beliefs or threatens their status or assets for being deemed “enemies” of the regime in charge. To make the philanthropic sector as democratically accountable as possible, transparency must be protected, despite evidence that suggests that waters are dangerous to swim in right now.

Giving by Trusting and Ceding Control to Community Leaders

Donor-advised funds are a key service provided by community foundations around the country—the very first DAF was created in 1931 by the New York Community Trust, a community foundation, which offers donors the opportunity to identify and resource work that’s embedded in its local context and administered by leaders who know their terrain the best.

Seeding Justice, a foundation based in Oregon, administers “donor-in-movement” DAFs, which combine donor input with more broadly advised participatory grantmaking processes. They designed these vehicles in response to analyses that DAFs were too often taking in more than they disbursed, whereas this system ensures their donations keep flowing out the door.

DAFs can also align with community priorities by entrusting their grantees with general operating support, allowing experts to fund critical priorities, and limit strings attached. Scott’s Yield Giving deploys this philosophy, reflected in its name, and the Amalgamated Foundation defaults gifts to general operating support in its grant management portal. Kataly Foundation, meanwhile, has amply supported community loan funds and ownership projects.

Can Exceptional Practices Become the Norm?

The three largest US public charities are DAF sponsors; six more DAF sponsors appear on the list of the twenty largest US public charities. These organizations should adopt abundant, quick, community-engaged, and transparent giving practices, as laid out above, to merit their stature in the field. “If the national DAF sponsors and community foundations did something to inspire donors, they could help move a lot more money,” #HalfMyDAF’s Jennifer Risher told Proximate in an interview about DAF reform.

Good practices are out there, but these practices need to be the rule, not the exception.

While they represent only 3 percent of DAF sponsors, national sponsors—groups with no geographic or cause-based mission, such as Fidelity Charitable or the National Philanthropic Trust—held 70 percent of all DAF assets, took in 73 percent of all DAF contributions, and gave out 61 percent of all DAF grant dollars in 2023.

There are promising signs: Fidelity’s 2025 Giving Report stated that 80 percent of outgoing grants opted for increased transparency by including donor names and addresses, and Fidelity itself revised its policies to prohibit DAF-to-DAF grants to meet minimum grant requirements and to enable its trustees to make grants from accounts that have been inactive for two years.

These examples are critical. And in our current political environment, voluntary efforts to shift how philanthropy is administered and to make it more democratically accountable are at the cutting edge of possibility. But Congress must act now to create a new mandate for all DAF sponsors.

“Self-regulation, or more equity-centered DAF sponsorship, is a start, but will only work with a certain minority of donors,” Thaddeus Squires, founder of Social Impact Commons, shrewdly warned Proximate. “In the end, our sector’s ingrained cultural practice of bowing to donor control and interests will require the heavier hand of statute to start to shift the culture.”

Good practices are out there, but these practices need to be the rule, not the exception. If this shift in practice is achieved, whether by law or by establishing strong industry self-regulation, the result would be billions more dollars for the nation’s nonprofits and the communities they serve.