Donor-Advised Funds 2025: Impact, Controversy, and Key Data

Donor-Advised Funds (DAFs) have become the hottest topic—and source of controversy—in the nonprofit sector’s financial landscape. In just the past two decades, DAF assets have exploded—yet this tidal wave of giving opacity has left fundraisers and nonprofit leaders wondering: Are DAFs truly driving more money into causes, or just rerouting it into financial vehicles that benefit sponsors more than mission-driven organizations?

Let's untangle the facts, scrutinize the numbers, and dive into both the mechanics and debate shaping DAFs in the U.S. as of 2024-2025. All major figures and findings below are drawn from the latest available reports by the National Philanthropic Trust (NPT), Giving USA, the Institute for Policy Studies, and other leading sources.

1. DAFs: From Side Note to Center Stage

DAFs—funds managed by charitable sponsors (often financial institutions or community foundations) allowing donors to deposit assets, receive an immediate tax deduction, and recommend grants out to charities on their schedule—have gone from obscure to dominant since the early 2000s, particularly after Schwab and Fidelity entered the arena and received nonprofit status to launch their platforms.

• In 2000, DAFs held a modest $14.1B in assets.

• By 2010, assets rose to $31.8B.

• As of 2023, DAF assets totaled $251.52B—a 9.9% increase over 2022, with four-year growth at 67%.

DAFs are not fringe: nine of the top twenty recipients of U.S. charitable gifts are now DAF sponsors, and DAFs receive over a sixth of all individual giving each year.

2. Fund Flows: What Goes In, and Does It Come Out?

Contributions In

• 2023 contributions to DAFs: $59.43B (down 21.7% from $75.94B in 2022—by far the largest drop on record after pandemic-era surges).

• Compound annual growth (2019-23): 9.4%.

• Over the last decade, DAF contributions have often outpaced sector-wide giving: 15% average annual growth versus around 5% for other nonprofit fundraising.

Grants Out

• Grants to nonprofits from DAFs in 2023: $54.77B (down 1.4% from 2022's record, but still up 62% from 2020).

• Compound annual growth for grantmaking (2019-23): 17.8%.

What’s Left in the Tank?

• DAF charitable assets at end of 2023: $251.52B (up 9.9% YoY).

• The steady asset growth signals that contributions into DAFs consistently exceed grants out each year.

3. The Ticking Debate: Are DAFs Growing Giving, or Displacing It?

Here’s the crux: If DAFs were turbocharging sector giving, you would expect the entire nonprofit ecosystem to see accelerating growth. Instead:

• Total U.S. charitable giving (Giving USA) from 2001–2019 averaged only about 4% annual growth—just half the 8% averaged annually in the previous 1981–2000 period.

• From 2014–2023, fundraising for nonprofits (excluding DAFs) increased about 5% per year. DAF funding, by contrast, jumped 15% annually—assets in DAFs surged 19% on average.

• Bottom line: The rapid DAF asset accumulation has not translated to similarly rapid growth in funds reaching mission-driven nonprofits.

Giving USA and the “Counting” Problem

Giving USA and other sector reports historically count dollars going into DAFs as charitable contributions—regardless of whether these dollars are promptly directed to actual nonprofit organizations.

• In 2023, about $59.4B went into DAFs, but only $54.8B was granted out—leaving at least $4-5B to accumulate rather than support immediate nonprofit work.

• When inflows exceed outflows over multiple years, assets balloon; DAFs now hold almost $1 for every $6 given in the U.S. each year.

4. What Is “Payout Rate”—And Why Does It Matter?

“Payout rate” is a critical measure: What proportion of DAF assets gets granted to nonprofits each year? Here, debate about calculation methods is fierce:

• Traditional DAF industry reports (like NPT) calculate payout as current year’s grants ÷ prior year’s assets (yielding reported rates of 20–24%).

• Independent analysts (e.g. Institute for Policy Studies, IRS-preferred method) use a more conservative approach: current year’s grants ÷ (end-of-year assets + current year’s grants), which yields much lower real-world payout estimates—around 9–10% median across all DAF sponsors in 2023.

• Among sponsor types in 2023:

  • National DAF sponsors: Median payout rates of 14.5–18% (still much lower than headline industry figures).

  • Community foundations: Lowest payout rates—8–9% median.

  • Donation processors: Outliers with 80%+ rates (because they exist primarily as rapid pass-throughs for online/crowdsourced giving).

  • Account-level median payout rates at individual DAFs are even lower, with a significant share of DAFs making no grants in a given year.

The Payout “Overstatement” Problem

• Payout rates are often inflated by DAF-to-DAF transfers (e.g., $4.4B in 2023), where dollars move between DAF sponsors but do not reach operating nonprofits.

• Many DAF grants out are simply moving money between DAF providers (Fidelity → Schwab, etc.), not out to the broader nonprofit ecosystem.

5. Who Really Benefits?

For Financial Institutions (Sponsoring DAFs):

• DAF sponsors—especially those connected to major financial firms—charge investment and management fees on assets under management.

• DAFs now function as fast-growing, fee-generating “investment vehicles” for sponsors while facing lighter regulation than private foundations.

For Donors:

• Get immediate tax deduction regardless of how long they take to direct funds to actual nonprofits.

• Can hold substantial amounts in perpetuity, maintain advisory (but not legal) control, and unlock privacy/anonymity uncommon elsewhere in philanthropy.

For Nonprofits:

• See less predictable, less immediate flow of donations (DAFs are a “reservoir” not a “stream”).

• Largest, brand-name charities capture most DAF grant dollars—smaller or urgent-need organizations may struggle for access.

6. Policy and Reform Landscape

Problem areas:

• No mandatory minimum annual payout (unlike the 5% required for private foundations).

• Opaque reporting—public and regulators lack access to account-level data, making it hard to assess if most DAFs are being used as intended.

• DAF-to-DAF and foundation-to-DAF transfers risk becoming “parking lots” that dampen real-time community benefit.

Proposed solutions developing in the sector:

• Mandate time-limited payout: Require DAF dollars to be fully granted within 5, 10, or 15 years.

• Limit or scale tax deductions to grants from DAFs (not just into them).

• Set household DAF asset caps (as with retirement accounts).

• Push for Giving USA and IRS to report only DAF outflows as charitable contributions, not deposits into DAFs.

7. What the Data Say: Key 2014–2023 Numbers

YearDAF AssetsContributions to DAFsGrants from DAFsReported Payout Rate (NPT)Med. Payout Rate (IPS/IRS method)Total U.S. Giving2014$63B$19B$12.6B20–21%~9–10%$353.0B2016$78B$24.3B$15.8B21–22%~9–10%$390.1B2019$141B$38.8B$27.4B22–23%~9–10%$449.6B2020$152B$47B$33.7B24.1%~9–10%$471.44B2021$201B$72.7B$45.74B27.5%~9–10%$515.97B2022$228.9B$75.94B$55.53B24.1%~9–10%$499.33B2023$251.5B$59.43B$54.77B23.9%9.7%$557.16B2024$271.3B*n/a$58–59B*~24%*~10%*$592.5B

(*Partial/estimated data for 2024, focusing on trends)

8. The Bottom Line: DAFs and the Nonprofit Sector

• Despite DAFs now representing one of the largest pools of “charitable” capital in the country, there is no robust evidence that DAFs increase total giving to nonprofits. The available data suggest that DAFs displace rather than multiply philanthropic funding.

• DAF asset growth surpasses outflows, and grants are not outpacing historic sector averages. DAFs may provide convenience for some donors, but they create delays and uncertainty for nonprofit planning and cash flow.

• The lack of mandatory payout and opacity of reporting allow large sums to sit indefinitely, cementing DAFs’ role as both a wealth shelter and a lucrative business for their sponsors.

9. What Can Nonprofits Do?

• Track DAF dollars carefully: Segregate DAF income, analyze donor sources, and assess whether DAF gifts are replacing or supplementing prior direct donations.

• Advocate for sector reform: Push for greater DAF transparency, improved payout requirements, and a sector-wide shift toward reporting on DAF outflows, not inflows.

• Use tools like Holdings for better tracking and compliance: Modern platforms (like Holdings) help you segment DAF funds by program, grant, or donor, ensuring both compliance and visibility. Import data from DAF gifts efficiently, manage virtual accounts and cards for designated use, and streamline reporting so you aren’t left in the dark about where your money is—and where it could go next.

In sum: DAFs are fundamentally reshaping the philanthropy landscape, concentrating vast resources in accounts controlled by charitable sponsors with less oversight than private foundations. The promise of increased giving has not materialized in sector-wide results—making it urgent for nonprofit leaders and allies to push for policies and tools that return decision-making and flow of funds to the organizations and constituents that need it most.

For more on proposed reforms and to take action, see the Charity Reform Initiative at the Institute for Policy Studies.