What Are Donor-Advised Funds (DAFs)?
Donor-Advised Funds (DAFs) allow donors to contribute money or assets to a charitable fund, receive an immediate tax receipt, and then recommend grants to charities over time. The donor gets the tax benefit upfront; the charity gets the money later (sometimes much later).
This timing gap sits at the heart of an increasingly polarized debate in Canadian philanthropy. Are DAFs sophisticated tools for strategic giving, or tax shelters that delay charitable dollars while concentrating philanthropic power among the wealthy?
The Growth No One Disputes
According to WellFunded, 284 organizations in Canada now offer DAFs, collectively holding over $13 billion in charitable assets. Canada Gives’ 2024 Annual Report shows its DAF “Foundation accounts” reaching over $331 million, with an average account size above $1 million (CanadaGives).
These aren’t niche products anymore. DAFs now represent a fundamental shift in how charitable capital moves (or doesn’t move) in Canada.
The Case for DAFs: Why Donors Embrace Them
Strategic, Multi-Year Giving
DAF advocates assert that these funds encourage intentional philanthropy. Donors can contribute during high-income years, involve family members in grant decisions, allow assets to grow through investment, and take time to research organizations deeply before giving.
Instead of rushing decisions during year-end fundraising campaigns, families can plan charitable strategies that span years or even generations.
Tax Efficiency Drives Larger Contributions
Because donors receive tax receipts when they fund a DAF (not when they recommend grants) some individuals make larger charitable contributions than they would through direct giving. The immediate tax benefit, combined with the ability to recommend grants later, can unlock significant capital for philanthropy.
For high-net-worth individuals facing capital gains from business sales or stock portfolios, DAFs offer a mechanism to convert taxable events into charitable assets efficiently, before they may otherwise be ready to decide on the beneficiary of their gifts.
For charities that successfully cultivate DAF donors, these relationships can provide multi-year support that anchors strategic planning. A donor with $2 million in a DAF might recommend $100,000 in annual grants for a decade, creating predictable revenue streams.
A Canadian Origin Story
It’s also true that DAFs have a long and respected history in Canadian philanthropy. The first donor-advised fund in Canada was established in 1952 by the Vancouver Foundation, led by Whitford J. Van Dusen, one of the foundation’s founders and its first Chair (Imagine Canada).
For decades, community foundations were the primary organizations offering DAFs. It wasn’t until 2004, with TD Waterhouse’s launch of the first commercial DAF program offered by a financial institution, that the landscape shifted to include both community and corporate platforms (Carters).
This evolution underscores how deeply embedded DAFs have become in the Canadian giving ecosystem, and it reminds us that today’s debate is built on decades of philanthropic practice, not just recent trends.
DAF Day Canada: Encouraging Deployment and Dialogue
To address both opportunity and concern, DAF Day Canada was introduced. A national day focused on encouraging donors to recommend grants and for social profit organizations to strengthen their readiness (DAFDay).
Held on October 9, 2025, DAF Day invites donors, charities, and advisors to:
- participate in conversations about stewardship and generosity,
- access tools and toolkits for grant recommendations,
- and elevate awareness of the practical steps needed to turn potential into contributions (DAFDay).
For organizations, this means being prepared with clear instructions for donors, updated materials, and thoughtful engagement. The success of DAFs depends on relationships as much as capital.
The Case Against DAFs: Where Critics See Issues
Tax Shelters That Delay Public Benefit
DAF contributors claim tax deductions immediately, reducing public tax revenue, while charities may wait year to recieve funds.
Private foundations must distribute 3.5% of their assets up to $1 million and 5% on assets exceeding $1 million annually under CRA rules, effective January 1, 2023 (CRA). However, while the DAF-holding foundation must meet overall disbursement requirements, there are no spending requirements for individual DAF accounts (ThePhilanthropistJournal).
This means that Canadian taxpayers may end up subsidizing charitable giving each year through forgone tax revenue intended for a charitable benefit, but which may not materialize for years, even as communities face urgent needs.
The Data On Distribution Rates
According to The Philanthropist Journal’s October 2025 analysis of Canadian DAF data, the Veritas Foundation found that the 2023 payout ratio for Canadian DAFs was 9.7%, while DAFs held by community foundations had a payout ratio of only 5.4% (ThePhilanthropistJournal).
Equity and Access: Who Benefits?
The equity questions around DAFs are more nuanced than they first appear. While minimum contribution requirements vary dramatically, some providers like GiveWise Foundation have no minimum at all (GiveWiseFoundation), while others require $5,000, $25,000, or even $250,000, showcasing the practical barriers that extend beyond initial contributions.
Layered on top of that is another consideration entirely: that the knowledge required to maximize tax benefits through appreciated securities, business sales, or complex estate planning isn’t equally distributed. The infrastructure that supports DAF giving (e.g. financial advisors, estate planners, and tax specialists) primarily serves high-net-worth individuals. The result is that in a social-profit landscape where fewer donors are giving but contributing larger amounts, a growing share of that concentrated wealth flows into DAFs rather than directly to charities.
For charities, the equity implications cut even deeper. Organizations with professional fundraising staff, donor databases, and capacity for sophisticated stewardship can cultivate DAF relationships effectively. Grassroots organizations, Indigenous-led charities, and small community groups often cannot compete for this capital, regardless of the urgency or value of their work.
The Stewardship Burden Falls on Charities
The dominant narrative around DAFs places responsibility on charities to unlock this capital through sophisticated donor relations. The need for donor stewardship is present across all aspects of the social-profit sector, so one could argue that cultivating and stewarding DAF donors is just another audience to consider. But DAFs can create a challenging dynamic: one that allows DAF donors to claim the tax benefit without any timeline for creating charitable impact, while charities bear the cost of pursuing funds that exist in limbo.
What Charities Face: Practical Realities
For organizations navigating this landscape, several realities emerge:
Being “DAF-ready” requires resources:
Charities need clear giving instructions, updated materials, and systems to track DAF contributions separately.
Relationships matter, but they’re resource-intensive:
As with all donors, there are no shortcuts with DAFs. Cultivating DAF donors means personalized engagement plans, regular updates, customized reporting, and long-term relationship management.
Charities that already secure DAF grants can invest in better stewardship, which attracts more DAF grants. Organizations without existing DAF relationships may struggle to break in.
Final Thoughts: Balance Promise and Critique
Donor-Advised Funds occupy an important (and often contentious) place in Canadian philanthropy. They are both a tool for intentional, long-term giving and, in some critics’ eyes, a mechanism that can delay capital flow and emphasize tax planning.
However you view them, the reality is that DAFs exist, and with billions in assets under management, they influence the sector’s fundraising dynamics. DAF Day Canada shines a spotlight on both sides of this conversation, reminding charities to be prepared and donors to be intentional.
For social profits, the takeaway is clear: the capital is there, but unlocking it responsibly requires clarity, relationship-building, and strategic stewardship. By engaging thoughtfully with DAF holders, charities can bridge the gap between intention and action and ensure that both sides of the debate are part of a constructive path forward.
At The Discovery Group, we work side by side with social profit organizations to help them grow and thrive. From finding the right leaders through executive search, to strengthening governance and strategic planning, to guiding campaigns and fundraising, we’re here to help you tackle your biggest opportunities with strategic support.