A donor-advised fund is a tax vehicle for charitable giving. Let's say Jane Doe is a generous person who wants to donate one or more to qualified non-profit organizations. Instead of making lots of small donations or even one big one every year, she can set up a Donor Advised Fund and set aside a big chunk of money all at once to gain a personal tax advantage. Then when she wants to make a donation, she instructs the organization holding her money to send a check.
Because Jane set up her DAF with a large chunk of money, she already got "credit" on her taxes as if she'd donated the entire amount. In fact, that's what she is did since the organizations who hold donor advised funds are, themselves, non-profit organizations (often affiliates of large for-profit financial companies like Vanguard, Fidelity, or Charles Schwab). So Jane gives her money in one big chunk to one of these organizations with the stipulation that she or her representative may direct the distribution of the money. This is why gifts to non-profits from DAFs are often called "grants," which is very confusing. But essentially, it's the holder of the DAF who is "granting" the donor's money to the non-profit at the direction of the donor. That's why DAF outlays to a non-profit are always accompanied by a letter from the organization holding the DAF telling that non-profit NOT to issue a tax receipt or a letter containing tax-deductible information to the donor: the donor already received a tax deduction when they funded the DAF.
Why would anyone create a DAF? Tax law is complicated, but there can be tax advantages to itemizing deductions on your tax return. However, itemizing only makes sense if your itemized deductions exceed the standard deduction. Creating a DAF can create a situation where you exceed the standard deduction, saving you money by allowing you to itemize.
The history of Donor Advised Funds (DAFs) is generally broken down into three major phases.
1. The Early Years (1930s–1960s)
The first donor-advised fund was established in 1931 by the New York Community Trust. During this era, DAFs were a niche tool used almost exclusively by community foundations to allow local donors to have a say in where their charitable contributions were spent, rather than leaving the decision entirely to the foundation's board.
2. Legal Recognition (1969–1990)
The Tax Reform Act of 1969 was a turning point. It created a formal distinction between "private foundations" and "public charities." While it didn't use the specific term "donor-advised fund," it established the legal framework that made DAFs more attractive than private foundations by offering higher tax deduction limits and fewer administrative burdens.
3. The Modern Boom (1991–Present)
The "DAF revolution" truly began in 1991, when Fidelity Investments launched the Fidelity Charitable Gift Fund. This was the first "commercial" DAF, and it moved the tool from local community foundations into the hands of everyday investors.
Since then, the sector has grown exponentially. In 2006, the Pension Protection Act provided the first official legal definition of a "donor-advised fund" in the U.S. tax code. DAFs have become the fastest-growing vehicle in philanthropy, now accounting for more than 10% of all charitable giving in the United States. As of 2026, there is ongoing legislative debate (such as the proposed ACE Act) discussing whether DAFs should have mandatory "payout" timelines to ensure the money reaches working charities faster.
DAF's also been a source of confusion for many non-profits who just don't know how to record them properly. And with more and more contributions coming in from DAFs, it's important for a non-profit to get this right. See my article on Soft Credits for some help with that.
Learn More
What is a Donor Advised Fund? (2026)
Pros & Cons of Donor Advised Funds (2025)
