When DAF Grants Get Stuck

The Moment Every Advisor Dreads

Donor-advised funds (DAFs) are often positioned as a seamless, efficient tool—one that simplifies philanthropy and accelerates impact. In most cases, they do exactly that.

But nearly every advisor remembers the first time a client’s DAF grant didn’t go as planned.

A grant is delayed—or worse, it’s rejected outright.

The client’s reaction is immediate:

“I could have just written a check and gotten this to the charity down the street.” 

Instead, the funds are held up in process, while the intended impact is delayed, or sometimes, lost altogether.

Frustration is understandable, but it’s only part of the story.

To properly advise clients, it’s critical to understand not only why DAF grants get delayed, but also why that friction exists in the first place. In many cases, what appears to be a breakdown is actually the system working exactly as it should and is ultimately protecting the donor.

What Happens After a Grant Is Recommended

From a client’s perspective, the grantmaking process often feels complete once they click “submit.” In reality, that’s just the beginning.

DAF sponsors have a legal and fiduciary responsibility to ensure that every grant complies with IRS regulations. This includes verifying that the recipient organization is a qualified public charity and that the grant itself meets all applicable requirements.

This due diligence process is not optional—it is foundational to how DAFs operate.

Common Reasons DAF Grants Get Stuck

Understanding the most frequent causes of delays can help advisors anticipate and prevent issues before they arise.

1. Charity Eligibility Issues

DAF sponsors must confirm that the recipient organization is recognized as a qualified public charity under IRS rules.

This typically involves verifying that the organization:

• Is registered under Section 501(c)(3).

• Appears in IRS Publication 78, a publicly available list maintained by the IRS of organizations granted tax exempt status as a 501(c)(3).

• Is listed in the IRS Business Master File, a comprehensive registry of all tax exempt organizations in the United States.

• Is not subject to sanctions or other regulatory restrictions.

If an organization cannot be verified through these channels, the grant will likely be delayed and may ultimately be rejected. In some cases, an organization may have previously held valid status but has since had that status revoked. This is another common cause of disruption.

2. Grant Purpose Restrictions

Once an organization’s eligibility is confirmed, the purpose of the grant must also comply with IRS rules.

A key IRS requirement is that DAF grants cannot provide any personal benefit to the donor. Many otherwise well-intentioned grants are delayed for failure to meet this requirement.

Some common real-world examples include:

• Attempting to use a DAF to pay for gala tickets, auctions, or fundraising events.

• Structuring a gift where part is deductible and part is not (so-called “bifurcated” donations).

• Receiving membership perks, preferred access, or event participation benefits.

• Using a DAF to reimburse prior donations or fulfill certain types of commitments incorrectly.

Similarly, donors cannot:

• Receive anything more than an incidental benefit (e.g., tickets, goods, services).

• Use DAF funds for political campaigns or to benefit specific individuals.

• Make grants that directly or indirectly benefit themselves or their family.

If a grant recommendation includes a nuanced or unclear purpose, it will often trigger additional due diligence.

3. Complex Grant Types

Certain types of grants inherently require more scrutiny, including:

• International grants

• Grants to private operating foundations

• Grants involving non-standard structures or purposes

These are not necessarily prohibited, but they do require additional steps, such as equivalency determinations (ED) to evaluate if a foreign grantee is the equivalent of U.S. charity, or expenditure responsibility (ER) to ensure that grant funds are used for charitable purpose. Both ED and ER can add significant time to the grant process.

4. Inability to Verify a Valid Payment Method

Even when an organization is eligible and the grant purpose is permissible, a grant can still be delayed if the DAF sponsor cannot confirm how to successfully deliver the funds.

This is a more common issue than many advisors expect. Examples include:

• Outdated or inaccurate information listed online

• Conflicting organization details across sources

• Lack of clear payment instructions or verified banking details

DAF sponsors must ensure that funds are delivered securely and to the correct entity. If there is any uncertainty, whether about the legitimacy of the payment destination or the accuracy of the information provided, the grant will be paused until clarity is established.

How Advisors Can Help

While some friction is unavoidable, advisors can play a critical role in minimizing delays and improving the client experience.

1. Strengthen Your DAF Knowledge

Advisors should build a working understanding of DAF rules and limitations. Resources include:

• DAF sponsor guidelines and donor manuals

• Educational platforms like DAFopedia

• Direct conversations with DAF provider representatives

Before recommending a grant, it’s often worth asking: Is this type of grant permissible?

2. Set Client Expectations

DAFs are powerful tools—but they’re not without guardrails. Advisors should proactively communicate that:

• Not all organizations are eligible recipients.

• Not all grant purposes are permissible.

• Additional due diligence may be required.

Setting expectations early can prevent frustration later.

3. Provide Complete and Accurate Information

Incomplete or unclear grant recommendations are a common source of delay. Advisors should aim to provide:

• The organization’s Employer Identification Number (EIN)

• A valid website or contact information

• Clear details on the intended grant purpose

The more complete the submission, the smoother the review process.

When “Stuck” Means Working as Intended

It’s easy to view a delayed or rejected grant as a failure of the system. But more often than not, it’s the opposite. What feels like friction is, in many cases, a safeguard.

DAF sponsors have a responsibility to ensure that all grants are compliant and that donors are protected from unintended consequences—including excise taxes that can arise from improper use of DAF funds.

For advisors, the goal isn’t to eliminate that friction entirely—but to understand it, anticipate it, and guide clients through it effectively.

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