DAFs never have to pay out to charities

This is actually true, but here’s some more context:

Yes, and: DAFs granted assets at an average 24% distribution in 2023 compared to the 5% required by foundations. This means that DAFs typically distribute far more assets than foundations.

Yes, and: many DAF sponsors have payout policies or minimum distribution guidelines. Amalgamated Bank, for example, requires a 10% distribution to nonprofits annually for DAF holders.

DAF distribution guidelines are not without controversy. The Strengthen Community Philanthropy Working Group recommends imposing a 5% distribution rule on DAFs. Proposed federal legislation, such as the stalled Accelerating Charitable Efforts Act, outlined mandated payout periods for DAFs and new rules for fees.

Altogether, organizations that offer DAFs and aligned groups spent more than $11 million since 2018 to prevent alterations to DAF policies.

DAFs can't be used for impact investing

False. Utilizing donor-advised funds for impact investing has gained popularity in the last decade as more donors seek to align their investment strategies with philanthropic goals. A survey from Social Finance found that 72% of DAF donors showed interested in making impact investments through DAFs, noting that a quarter of respondents would use their DAF assets for these investments if given the opportunity.

These providers are an example of innovators who allow you to allocate DAF funds towards various venture and impact investment opportunities:

• Neta Foundation

• Impact Foundation

• Impact Assets

• Fidelity Charitable

In only three years, the number of investors participating in impact investing has doubled, with 40% of investors utilizing impact investing as part or all of their philanthropic strategies (Bank of America).

DAFs are for the ultra wealthy

False. There used to be steep minimums for opening DAFs, which limited the accounts to only the ultra-wealthy. But in recent years, DAF sponsors are doing away with universal minimums or lowering the threshold. Large DAF sponsors, like Fidelity and Schwab, eliminated balance minimums and initial contributions. Many community foundations require a minimum deposit, such as $5,000, to create a new DAF. Upstart DAF platforms like Daffy.org will sponsor your DAF with low to no minimums and alternative fee structures.

DAFs give you total control over the funds

False. Once you open a DAF, the sponsoring organization has legal custody of the funds. You become an advisor to the funds, which means you recommend how the assets are granted. You still must advise within the parameters of the sponsoring organization’s policies.

For example, a sponsoring organization might require funds to only go towards verified U.S. 501c3 organizations. They could also decline to disburse funds if they go towards goods or services (for example, if you wanted to use your DAF to purchase art at a charity auction), or if the recommendation seems to benefit related parties.

DAFs require nonprofit evaluation expertise

False. One of the biggest features of a DAF is the ability to earmark funds for granting now, and do your research and granting at a later date. That doesn’t mean you’re on your own when it comes to research, though.

The largest players (Fidelity, Schwab, etc) do their best to educate clients on the tax strategies, and are now hosting tools and resources to guide their clients around effective philanthropy.

Community foundations that sponsor DAFs can shepherd granting aligned with their programming.

Modern platforms like Daffy.org provide tech solutions to facilitate the granting process. Other platforms like GiveWell and CauseWay curate “tailored grants” or “cause networks” that group multiple organizations under curated themes.

Daffodil’s giving platform brings discovery, match-making, and visibility into the ROI of giving front-and-center to the donor experience.

Surely this list isn’t everything.

Did we miss anything? What are other misunderstandings or myths around donor-advised funds you’ve been hearing?