The Quiet Shift: How Donor Advised Funds May Rewrite the Bequest Pipeline

Several years ago, I sat in the well-appointed home of a wealthy donor to a large nonprofit institution.  The donor was giving at the principal gift level to a Heaton Smith client, exhibited high affinity for the institution, and had been a consistent partner for more than a decade.   However, during the discovery phase of our conversations, the donor disclosed that he intends to direct all of his testamentary philanthropic dollars – totaling multiple seven figures – to his Donor Advised Fund (DAF) and name his children as successor advisors.  

This is not an isolated event.  Since that meeting, I’ve worked with an increasing number of higher-capacity donors who have either named their DAF as the sole beneficiary or a significant percentage beneficiary of their testamentary philanthropic dollars.  The advent and growth of DAFs have presented a structural change in the way that many higher-capacity donors give during life, and importantly, they are altering the way in which a growing number think about how to give through their estate plan.  This concerns me as it relates to the great inter-generational transfer of wealth anticipated since 1999. 

Why Donor Advised Funds Are Reshaping Estate Giving

The nonprofit sector has been anticipating the great inter-generational transfer of wealth since the 1999 Boston University Center on Wealth and Philanthropy report, Millionaires and the Millennium: New Estimates of the Forthcoming Transfer of Wealth and Prospect for a Golden Age of Philanthropy, published by Paul Schervish and John Hansen. (Havens, 1999) The researchers updated their report in May 2014 and increased their wealth transfer estimates from $40.6 trillion in 1998 dollars to $58.1 trillion in 2007 dollars.  (Havens J. J., 2014)

Since the report was updated, the US stock markets have more than doubled just since 2019, and the average home value has increased nearly 65 percent during the same period. Indeed, the recently released Giving USA 2026 report found that charitable bequests increased nearly 20 percent in 2025 — from roughly $52 billion in 2024 to $62.2 billion in 2025 — the strongest growth of any giving source and a likely preview of the intergenerational wealth transfer to come. Given the current wealth levels in this country, we should be in the “Golden Age of Philanthropy.” But will the popularity of DAFs reduce the “Golden Age of Philanthropy” to something much less impactful on the Third Sector? 

Why Donor Advised Funds Appeal to High-Capacity Donors

The appeal of DAFs is no accident. DAF sponsors have mastered the user experience of giving.  They make account setup frictionless and market the ability to accept non-cash assets such as appreciated securities, real estate, and business interests.  

Federal tax policies have also added fuel to this fire.  The doubling of the standard deduction in 2017 federal legislation ushered in a strategy called “bunching,” where donors frontload a few to several years of giving into a DAF that exceeds the standard deduction.  More recently, new legislation, such as the One Big Beautiful Bill with its 0.05% charitable deduction floor and 35% deduction ceiling, makes bunching gifts into DAFS more popular still as a strategic option.      

Unfortunately, too many nonprofits have created this opening through their own inertia.  Institutions are overly reliant on passive bequest marketing that reacts to donor responses.  They fail to make a compelling case for the future impact of estate gifts, and gift officers often lack the technical confidence to discuss blended gifts and gifts of non-cash assets with donors.  When a nonprofit does not provide a clear case and vision for estate gifts, then DAF sponsors may prevail by default by offering ease and flexibility.  

Four Risks Donor Advised Funds Create for Nonprofits

A shift toward testamentary DAF giving creates four primary risks for the nonprofit sector:

1. The Successor Advisor Gamble: While donors often believe their children will honor their philanthropic intent, successor advisors are not legally bound to support the same institutions as their parents. As generations drift geographically, politically, and socially, the “affinity link” to a local hospital, parish, or alma mater weakens.
2. Fragmented Impact: A $5 million bequest to a university, hospital, or social services organization can have a significant and lasting impact on those served by the organization. That same $5 million gifted to a DAF, managed by three children over twenty years, will likely be distributed as a series of smaller, fragmented grants. The power of the principal gift is diluted.
3. Assets Under Management Incentive: Most DAF sponsors are financial institutions or community foundations. They earn fees based on assets under management. They are structurally incentivized to encourage donors to keep funds within the DAF ecosystem and therefore promote testamentary gifts to DAFs or naming the sponsoring organization’s general endowment as the ultimate beneficiary.
4. Limited Endowment Growth: Gift planning is the lifeblood of an organization’s endowment. By bypassing the charity for a DAF, the donor denies the institution the permanent, predictable income that helps ensure long-term sustainability.

How Nonprofits Can Protect the Bequest Pipeline

To protect the future of organizations’ missions, nonprofit leaders and gift officers must move from a reactive posture to a proactive, gift planning mindset.

Firstly, reframe the value proposition for estate gifts through a case for long-term partnerships.  A written case statement should translate the organization’s mission into a compelling invitation for donors to partner with and include the nonprofit in their estate and financial plans.  A case should emphasize values, permanence, and the future, and include clear next steps for donors to consider an estate gift.  A gift planning case for support should also include blended gifts and a focus on the immediate and deferred impact these gifts will have on those served by the institution.  

Secondly, engage donors in gift planning conversations earlier in their cycle of philanthropy.  Don’t limit these conversations to donors who are aged 65+ but expand these conversations to donors who are aged 50+.  Younger donors are in their peak earning years and first major estate planning milestones.  A typical planned giving conversation is driven by a donor’s consideration of an estate gift.  However, a gift planning conversation is holistic and includes how donors want to help their heirs, donors’ financial needs, the assets they own, and the timing and impact that they want to have on a nonprofit institution – now and later.  

Thirdly, normalize the DAF conversations with donors.  Ask donors: What is the ultimate purpose for your DAF?  Is it a pass-through for annual giving, or is it intended for multi-generational philanthropy?  According to the DAF Research Collaborative 2025 report (The DAF Research Collaborative, 2025), the average DAF account balance was $91,300 with an average percentage payout of 25.2%.  Most DAFs are not established for multi-generational philanthropy until a seven- or multi-seven-figure gift is realized.  By asking early, you can help donors define their DAF’s role before it becomes the default estate beneficiary.  

Fourthly, if a donor is committed to leaving their testamentary dollars to a DAF, gift officers should pivot to a percentage beneficiary strategy.  Ask the donor to name your institution as a percentage beneficiary of the DAF that meets the donor’s impact goals for your institution while leaving enough margin in their testamentary dollars to satisfy the goals for the DAF.  Tie this ask to the values of the donor, the long-term needs of your institution, and the impact that their gift would have on your organization’s mission.  Allow donors to restrict their gift to a program, scholarship, service line, or population that is most important to them and offer any relevant naming and/or recognition conventions according to the gift size and the donor’s preferences.  DAF donors should be high-priority gift planning prospects and engaged accordingly.

Fifthly, discuss the impact their gift would have on your mission while avoiding “pie in the sky” rhetoric.  Articulate the tangible ways that a $1,000,000 estate gift would have on your organization and the reasons for the donor to choose your organization now!

Sixthly, build an advisor network.  A DAF is often the preferred tool of wealth advisors, especially. If your organization doesn’t have a relationship with these gatekeepers, you are invisible during the estate planning process. Gift officers must spend time educating advisors on the institution’s stability, its ability to handle complex gifts, and its need for estate gifts.

The Golden Age of Philanthropy Will Require a Proactive Approach

Lastly, I am not anti-DAF.  These giving accounts are popular for nearly 3.7 million donors and continue to gain acceptance for higher-capacity donors. Nearly 500,000 new DAFs were funded between 2023 and 2024 alone.

However, one must recognize that the structural shift to DAFs is not a temporary trend; it is a fundamental and permanent part of the philanthropic landscape.  The question for nonprofit leaders and gift officers is simple: Will your organization be a passive observer as billions of testamentary dollars flow into third-party accounts, or will you be an active participant in the decision-making conversations that determine the long-term use of those funds?  The Golden Age of Philanthropy is coming, but only for those who make the case for and proactively ask for it.   

So, what did the donor about whom I referenced earlier do with his testamentary gift?  He named his DAF as the sole beneficiary of more than $2.8 million.  Why?  Partly for the ease of the DAF structure, and he did not believe that the organizations he supported truly needed this gift.  He is not alone.