What is a donor advised fund?

Interestingly, the T3010 asks every registered charity whether it held any donor advised funds during the year and how many accounts it had at year end, yet neither the Income Tax Act nor the CRA gives a donor advised fund a legal definition. So here's a technical explanation and a practical one.

The technical explanation

A donor advised fund is a named account inside a registered charity, almost always a public foundation, which in this role is called the sponsor. The donor's gift to that charity is irrevocable and receipted in the year it's made. From then on the money is the charity's property: it invests it, grants it to qualified donees, and has the final say on every grant. The donor keeps advisory privileges, meaning the right to recommend where the money goes.

The closest thing to an official description is in the CRA's guide to completing the T3010, written "for the purposes of this guide." It describes a fund split into donor accounts, owned and controlled by a registered charity, where donors can make ongoing, non-binding suggestions and the charity alone decides.

Because the law never names the arrangement, a fund is governed by the rules that apply to the charity holding it, plus that charity's own policies. The disbursement quota, for example, applies to the sponsoring foundation as a whole, not to each account.

The practical explanation

In practice, a donor advised fund works like a giving account. You put in cash or publicly listed shares when it suits your tax year, take the receipt then, and decide later which charities get the money and when. Gifting listed shares directly means no capital gains tax on the growth, and the receipt is for their full market value.

The sponsor handles the receipts, the investing, the checks on each charity and the paperwork, so a family can give with the structure of a small foundation without running one. Sponsors include community foundations, independent foundations set up for this purpose, and foundations connected to banks and investment firms. Some have no minimum, while others ask for $10,000 or more to open a fund.

Those T3010 lines are what WellFunded's DAF data is built on. In their latest filings, 205 charities with at least ten fund accounts reported about 74,500 accounts holding $17.3 billion, and DAF sponsors grant about $2.2 billion a year to roughly 21,500 charities.

Questions people also ask

Do donor advised funds exist in Canada?

Yes. They're offered by community foundations, independent foundations and foundations connected to banks and investment firms, and the version of the T3010 introduced in January 2024 added questions about them.

Can I take money back out of a donor advised fund?

No. The gift is irrevocable once it's receipted, so the money can only go out as grants to qualified donees, through the sponsor.

Who decides where the grants go?

The sponsoring foundation, legally. In practice, sponsors generally follow donor recommendations that meet their policies and go to eligible charities.

Is there a minimum annual payout for my fund?

Not under the Income Tax Act. The disbursement quota applies to the sponsoring foundation as a whole, though some sponsors set their own minimum for each account.

How is a donor advised fund different from a private foundation?

A private foundation is its own registered charity, with its own board, its own T3010 and its own legal costs. A donor advised fund is an account inside someone else's charity, so the sponsor carries that work.