By Tides March 24, 2025

Donor Advised Funds: How To Use DAFs for Social Justice

Our complete guide to how donor advised funds work — and how to use them for social change.

Donor advised funds are a powerful tool for advancing social change. These funds have quickly gained popularity among donors in recent years, providing immediate tax benefits while making it simple to support multiple organizations.      

As of 2023, there were roughly 2 million donor advised funds — or DAFs — in the United States, totaling $251.52 billion in assets. Of that, DAF holders granted $54.77 billion to a wide range of causes in 2023, the second-highest annual amount on record.

While this suggests donors far and wide use DAFs to propel changemakers’ work, the reality is that DAFs are easily misunderstood. What are donor advised funds? How do donor advised funds work? Can DAFs really drive positive impact? 

Here, we’ll demystify what DAFs are, who uses them, and how, in the right hands, DAFs can fuel critical social justice work.

What Is a Donor Advised Fund (DAF)?

A donor advised fund is a charitable account that enables you to support the causes of your choice. One key advantage? The ability to enjoy tax benefits while taking the time to determine your giving strategy. You contribute to your DAF, take the full tax deduction on your contribution right away then work with a DAF provider — such as Tides — to identify and recommend grants to leaders and organizations on the frontlines of social justice. 

While you’re making grants, DAF contributions can be invested in stocks, mutual funds, and other investments to generate tax-free growth for charitable giving.

Who Uses DAFs?

Any individual or entity can use a DAF if they want immediate tax benefits while supporting important causes over time. If you want to grow your charitable giving, would benefit from a tax deduction, and are interested in helping community leaders drive change, a DAF may be for you.

Some of the most common DAF holders include: 

Individuals: An individual might use a DAF to receive a tax deduction and support their long-term philanthropic goals, without the pressure of selecting grantees immediately.

Families: DAFs allow families to engage in legacy giving that extends beyond one family member’s lifetime. 

Institutional and family foundations: Some foundations use DAFs vs. private foundations to distribute funds more flexibly and with fewer reporting burdens, since Tides is responsible for collecting and reviewing reporting and other compliance requirements.

Corporations: DAFs are an ideal vehicle for funding charitable initiatives, facilitating employee matching programs, or engaging in community grantmaking.

How Do Donor Advised Funds Work?

With a DAF, you donate cash, securities, or other assets to a donor advised fund, which is managed by a third-party DAF provider. You receive a charitable tax deduction at the time you contribute to your DAF, then work with your DAF provider to develop a strategy for investing and distributing assets in the DAF. 

As the name implies, you, as the donor, get to advise on how the funds are invested and which nonprofits you want to receive the funds. Your DAF provider will have ultimate control over the funds, but they’ll take your recommendations into account.

What Are the Advantages of Donor Advised Funds?

Donor advised funds can be a powerful and simple way to advance positive change in your community. Some common donor advised fund benefits include: 

Flexibility: Unlike starting your own private foundation and taking on the slog of administrative and legal burdens, opening a DAF gives you immediate access to a wide range of social impact tools, including grantmaking and impact investing. You can recommend a grant or investment at any time. DAFs at Tides can also make mission-aligned equity or loan investments in for-profit companies and funds doing social impact work.

Global reach: Certain DAF sponsors, like Tides, can help U.S. donors overcome the challenges of supporting non-U.S. organizations, including overseeing all compliance and reporting requirements. The right DAF sponsor can unlock philanthropic impact worldwide.

Anonymity: If you choose to be anonymous, your DAF provider won’t reveal your identity to the organizations you support. That anonymity can help you minimize security concerns, protect your family’s privacy, or avoid additional solicitations.  

Redistribution: When used to redistribute wealth, DAFs become powerful tools for social justice. Contributing to a DAF can help you commit to resourcing movement leaders and moving your money quickly.

Strategic advising:When you select a DAF provider, consider whether you’ll receive hands-on support from a philanthropic advisor. While many DAF providers don’t offer dedicated support, Tides provides strategic advising for all DAF holders to help maximize the impact of your giving.

Explore DAFs at Tides

What’s Wrong With Donor Advised Funds?

DAFs can be used as wealth redistribution tools. Through a DAF, you can easily resource social justice movements and even grow your assets so you can give more over time. But wealth redistribution can slow down when assets stay parked in DAF accounts instead of being granted out.

The promise of an immediate tax deduction for DAF contributions can give donors an excuse to park their money in a DAF, reduce their tax burden, and let the money sit for decades or even generations. Too much money that enters a DAF never leaves it: The annual payout rate for a DAF in 2024 was just 22.5%. Remember, when you contribute money to a DAF, you should consider that money available for fast redistribution. 

Donors choose Tides precisely because of our commitment to shifting power and resources to changemakers working on the ground. Our “Get Off Your Assets” campaign urges donors to move funds out of their DAFs and into the hands of movement leaders, and our partners have responded with great generosity. In 2023, DAFs at Tides had a payout rate of 57% — nearly triple the payout rate for a typical DAF. That money funds leaders and communities historically denied power, who are advancing progress on the most urgent issues of our time. 

What Are the Ways to Give to a DAF?

You can contribute to a DAF in several ways, depending on your financial situation and giving priorities. While all fund managers are different (and certain Tides gifts are subject to a review and approval process, which you’ll work through with your advisor), most donors give through: 

Cash contributions: Donors can contribute cash and receive an immediate tax deduction for the full amount.

Appreciated securities (stocks, bonds, mutual funds): You may be able to make a stock donation to a DAF without incurring capital gains tax and receive a tax deduction for the fair market value of the securities.

Private business interests and restricted stock: Most DAF advisors allow you to donate shares of privately held companies before a liquidity event. This may provide significant tax advantages.

Real estate: You may be able to contribute residential, commercial or undeveloped property, subject to certain conditions. The DAF sponsor will typically liquidate the property and deposit the proceeds into the DAF. Donating your property offers an immediate tax deduction and may avoid capital gains tax.

Trust and estate contributions: If you’re legacy planning, you can designate a DAF as a beneficiary of your will, trust, or life insurance policy. This allows you to create a lasting impact while potentially reducing estate taxes.

Depending on the DAF provider, pre-approval may be required before accepting certain types of donations, such as private securities or real estate. The information provided is general and educational and is not intended to be legal or tax advice. Tides strongly encourages you to consult with your tax advisor or attorney before making charitable contributions.

What Are the Investment Options Within a DAF?

Your investment options vary depending on the DAF provider, but they generally fall into the following categories: 

Pre-set investment portfolios: Most DAF providers offer a range of investment portfolios donors can choose from based on their risk tolerance and time horizon. These options can vary from conservative portfolios focusing on capital preservation to socially responsible investments that align with environmental, social, and governance (ESG) priorities. 

Socially responsible investments: Mission-driven DAF providers like Tides emphasize investment options that support specific causes, like social justice, or align with specific ESG criteria.

Money market or cash equivalent accounts: Some donors and DAF holders keep contributions in low-risk, highly liquid money market funds, so they can easily make grants at any time. 

What Kinds of Organizations Can You Grant to With a Donor Advised Fund?

Tides supports international and other complex grantmaking out of DAFs that many other DAF providers won’t handle, giving you more options for resourcing social justice leaders. 

Our partners may use their DAFs to recommend grants in compliance to relevant laws and regulations to: 

  • 501(c)(3) organizations
  • IRS-qualified public charities
  • Other DAFs
  • The charitable work of 501(c)(4)s
  • The charitable work of LLCs and other for-profit organizations

In addition to grants to nonprofit organizations, donors can also use their DAFs to recommend investments, including mission-aligned equity or loan investments in social impact for-profit companies and funds. 

How Do You Use a Donor Advised Fund for International Work?

Using a DAF for international work is possible, but it requires navigating certain regulations — a task not all DAF providers are equipped to handle. Tides specializes in international grantmaking. We often help our donors grant funds through: 

U.S.-based nonprofits with international programs: This is one of the simpler ways to fund international work. It involves donating to U.S.-based 501(c)(3) charities that operate overseas or partner with foreign organizations pursuing mission-aligned work.

Foreign organizations with an equivalency determination: Tides can also make grants to a foreign nonprofit that has been certified as the equivalent of a U.S. public charity under IRS rules. This can give you more pathways to supporting international work for the long term.

Expenditure responsibility: Some foreign nonprofits won’t qualify as U.S. public charities. In that case, Tides conducts expenditure responsibility to ensure the funds you grant are used for charitable purposes. We also conduct additional reporting and oversight, giving you more options to grant money overseas. 

How Quickly Can I Make a Donation From My DAF?

How quickly you can make a grant from your DAF depends on your provider. Timelines can vary depending on the nonprofit’s verification transfer and their method for accepting the funds. Tides offers rapid-response options to move resources more quickly.

How Do You Maximize the Impact of Your DAF?

Maximizing your DAF’s impact means ensuring that your philanthropic dollars are flowing to the leaders and organizations best equipped to drive change. At Tides, we believe creating a just and equitable world requires resourcing communities historically denied power. Through tools like DAFs, we work with our donor partners to direct funds specifically to changemakers within these communities.

Here’s how you can make your DAF a tool for justice: 

Move money, don’t hoard it: Prioritize redistributing wealth over accumulating it. Across the country, the billions of dollars held in DAFs could be making a difference now. Avoid becoming one of them by setting a high annual payout goal, rather than sticking to minimal disbursements. 

Fund grassroots organizations led by those most directly affected by social injustice: Many social justice efforts are routinely underfunded, especially communities of color and other historically marginalized groups. Look for organizations that are community-rooted and led by those closest to the problem. This includes selecting a DAF provider that shares your vision.

Give multi-year, unrestricted grants: When you recommend grants from your DAF, consider making them unrestricted to give organizations long-term stability and flexibility. Unrestricted grants can be used for any purpose the organization deems most important, from operating expenses and salaries to urgent needs as they arise. In contrast, restricted grants come with specific conditions: the donor designates exactly how the funds must be spent, often for a particular project, program, or need.  need to organize, adapt, and respond to their communities’ evolving needs. Unrestricted funding empowers organizations to organize, adapt, and respond to their communities’ evolving needs. 

Support the charitable work of 501(c)(4)s: With Tides, DAF holders can broaden their impact by using donor advised funds to support the charitable work of 501(c)(4)s while staying legally compliant. It is a myth that (c)(4) organizations only do political work, rather, most of their work must be charitable in nature. We conduct independent review to determine which (c)(3) permissible activities conducted by a 501(c)(4) grantee are eligible for DAF funding, manage IRS filings, and take care of other administrative details. That means our donor partners can support justice-advancing charitable work like voter registration campaigns and education on voter suppression tactics. 

Be transparent and accountable: Publish where your grants are going to inspire others, and engage with grantees regularly to adapt your funding strategy based on their needs.

Advance Justice: How To Open a Donor Advised Fund at Tides

Using a DAF to support grassroots social change leaders requires a DAF provider who shares your mission. At Tides, our mission is our difference. 

We see DAFs as an opportunity to shift power to communities that face systemic barriers, providing funds to amplify grassroots impact. Tides’ approach to DAFs is rooted in social justice to help our partners expand their giving options, move resources quickly, and feel confident they’re supporting leaders on the frontlines of change. 

Opening a DAF at Tides is simple: 

  1. Complete our questionnaire. Our team will contact you to learn more.
  2. Talk to us about your goals to ensure our values are aligned.
  3. Complete the application. It takes about 15 minutes. 
  4. Make an establishing gift.
  5. Start your giving journey.

Curious whether a donor advised fund at Tides is right for you? We’re here to help.

Let’s Talk 

Frequently Asked Questions About DAFs

Management fees vary between DAF providers. However, it’s important to consider what services and support you’ll receive for the fee.

Tides’ fees can range from 1% on a standard donor advised fund to 5% for funds supporting single domestic or international projects or organizations. Any DAF provider you consider should always review how you’d like to use your DAF and give you a clear assessment of potential fees. 

The main differences between a family foundation and a DAF come down to control, administration, tax treatment, and regulatory requirements. 

Control: Family foundations retain full control over grantmaking and investments, while DAF holders recommend grants to the DAF provider, who has ultimate control. 

Tax benefits and administration: DAFs have higher tax deduction limits than family foundations, and are also easier to manage with fewer legal and tax reporting burdens (because we handle them for you). There’s also no required minimum payout for a DAF, but there is for a family foundation.

Investment and growth: Family foundations have direct control over portfolio management, giving them more flexibility in investments. DAF holders, on the other hand, are limited by the options available through their DAF provider.

Longevity: Family foundations can last generations and hire family members as staff. DAFs can’t pay family members and can exist as long as the provider allows; some providers require funds to be spent within a certain period after the donor’s death.

A charitable trust is a legal entity for holding and distributing assets for charitable purposes. The primary difference is that beneficiaries of the trust will receive some of the money allocated to it. 

Depending on the trust’s structure, it will either: 

  • Pay the beneficiaries and donate the remainder to charity.
  • Donate to charity for a set period, then transfer any remaining funds to the heirs. 

This is not the case with a DAF. Your DAF provider will have control over any money you contribute to a DAF, and that money won’t return to you or your heirs. 

The best time to establish a DAF depends on your financial situation, tax strategy, and philanthropic goals. Opening a DAF can be beneficial if: 

  • You have a high-income year and want to offset taxes.
  • You anticipate a large capital gains event and would rather give more to charity than pay taxes.
  • You want to lower your taxable income for the current tax year.
  • You receive a significant inheritance and want to reduce your estate tax exposure.
  • You want to build a long-term giving plan instead of making one-time donations.

Yes, you can use a DAF for rapid-response giving for disaster relief or emergency response. While large relief agencies like the Red Cross get the most attention, many DAF providers like Tides offer pre-vetted funds for crisis response. This can make it easier to shift resources quickly to community-based groups working on the frontlines. 

Tides Foundation is home to several grantmaking initiatives, including the Crisis Response Fund, which resources grassroots leaders serving communities in crisis. Tides DAF holders can mobilize funds through the Crisis Response Fund, allowing you to act quickly if an emergency arises. 

Yes, donor advised fund holders have the option to remain anonymous when making a donation. You can also choose to withhold your name from grantees; they will see the gift as coming from a DAF holder, not you. 

The DAF minimum contribution varies between providers. You can open a DAF at Tides with a minimum of $100,000 of committed funding for U.S.-based activities. 

Many DAF providers allow donors to name one or more successors like children, family members, or other trusted individuals. After the DAF holder passes away, their successors can continue recommending grants to charities. 

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