THE FUNDRAISER’S GUIDE TO DONOR-ADVISED FUNDS

What Every Arts Organization Should Know About Donor-Advised Funds

By Catherine Heitz New

Note: The information shared through Fundraising Growth Now! is for educational purposes only and is not intended as legal, tax, or financial advice. We encourage both nonprofit organizations and donors to consult their own professional advisors regarding individual circumstances.

By the start of 2025, nearly $328 billion had already been allocated for charitable giving through donor-advised funds (DAFs). Meanwhile, charitable bequests continue to grow at historic rates, reinforcing what arts non-profits have been preparing for: the Great Wealth Transfer. It is no longer approaching—it's underway.

As more contributors embrace donor-advised funds, arts organizations that understand this charitable giving tool will be better positioned to inspire greater generosity. But the key isn't just understanding DAFs—it's building donor relationships that inspire donors to recommend those charitable dollars in support of your mission.

Why Donor-Advised Funds Matter

Donor-advised funds have become one of the fastest-growing charitable giving vehicles in the country. By the end of 2024, they held nearly $328 billion in charitable assets and distributed almost $65 billion to qualified nonprofit organizations. Today, there are approximately 3.6 million donor-advised fund accounts across the United States…and the numbers are growing.

Those statistics aren't speculative—they represent charitable dollars already designated for philanthropy. The question isn't whether donors are generous. The question is whether your arts organization is cultivating the relationships that inspire donors to recommend grants from those funds.

Why Donors Choose DAFs

Understanding why donors establish donor-advised funds helps us better understand the people behind them.

First, DAFs provide an immediate charitable tax deduction without the complexity of creating a private foundation. Donors can contribute assets today, receive the associated tax benefits, and decide later which organizations they want to support. Second, a donor’s charitable assets are professionally managed by financial institutions they already know and trust, while they retain the ability to recommend future grants. Finally, many donors also value the option to remain anonymous.

These advantages have fueled the remarkable growth of donor-advised funds—and created significant opportunities for arts organizations.

Donor-Advised Funds Are a Payment Option

The most important thing to remember about donor-advised funds is this:

DAFs aren't a fundraising strategy. They're simply a payment option.

Too often, organizations assume they need a separate fundraising strategy for DAFs. In reality, donor-advised funds are merely one way donors choose to make charitable gifts. Your organization’s fundraising strategy remains exactly what it has always been: build meaningful relationships between your arts institution and generous people who know you, like you, and trust you.

When a donor recommends even a modest DAF grant, don't view it as just another transaction. A $500 grant may represent only a small portion of a much larger charitable fund. Whenever possible, identify the donor behind the gift and begin strengthening and stewarding that relationship. That's where the real opportunity lies.

Understanding the Rules

Most of the challenges surrounding donor-advised funds aren't fundraising challenges at all. They're more often questions about understanding the rules well enough to help donors avoid unintended problems.

Rather than memorizing IRS terminology, remember one practical guideline: donor-advised funds generally support philanthropy—not personal benefits.

Recognition in an annual report, listings on a donor wall, thank-you letters, and invitations to complimentary stewardship events are generally considered incidental benefits and are permitted.

However, donor-advised funds generally cannot be used to purchase benefits that provide tangible personal value to the donor. Gala tables, memberships that include admissions or discounts, meals, tickets, merchandise, parking, and similar benefits typically require the donor to pay personally rather than through a DAF.

Another important consideration involves pledges. While donors may choose to make a personal pledge or multi-year commitment, they generally cannot commit their donor-advised fund to satisfy that obligation. Because the rules in this area can be nuanced, both donors and arts organizations should use care in how pledges and related commitment forms are structured and worded.

The best approach is simple: educate donors before they have questions, communicate clearly, and help them navigate these situations with confidence.

Relationships Are Still the Strategy

Unlike private foundations, donor-advised funds generally are not required to distribute their assets on a particular timetable. That means charitable dollars can remain invested until donors recommend grants, making continued stewardship and thoughtful cultivation ever more essential.

As you strengthen your organization's approach to donor-advised funds, remember these four principles:

• Treat every donor-advised fund gift as a relationship opportunity.

• Educate donors before they have questions.

• Celebrate generosity.

• When the rules matter, become a trusted guide who helps donors navigate them.

Keep this perspective in mind:

Donor-advised funds aren't your fundraising strategy – they are simply a payment option. Relationship development with donors remains the strategy.

If your arts organization wants to better understand donor-advised funds, strengthen donor stewardship, or prepare for the opportunities created by today's Great Wealth Transfer, schedule a conversation with RSC Associates CEO Catherine Heitz New. Together, we'll help you strengthen donor relationships and position your organization for long-term fundraising success.