Who Really Controls Your DAF? New Case May Provide Clarity.
A new case out of the United States District Court of Colorado is drawing significant attention across the non-profit and financial planning communities. Peterson v. Christian Community Foundation, Inc., filed January 15, 2026, goes to the heart of a question many donors may never have considered: What rights do you have over funds contributed to a donor advised fund (“DAF”)? The complaint alleges that the sponsoring organization, Christian Community Foundation d/b/a WaterStone, refused to honor grant recommendations made by the account’s properly appointed successor advisor, the grantor’s son.[1]
Donor advised funds have existed since the 1930s, but their popularity spiked after Fidelity Investments entered the market commercially in 1991. The term “donor-advised-fund” was formally defined through the Pension Protection Act of 2006. At its core, a DAF operates through a straightforward structure: A donor makes a contribution to a public charity—initially, this was often a community foundation—which established a separate fund or account to receive contributions from donors. The charity would then expend the funds in its discretion, but nearly always in line with the objective stated for the account.
The tax advantages associated with DAFs are considerable. Since contributions are made to a public charity, donors may claim a charitable deduction of up to 60% of adjusted gross income for cash gifts. DAFs also have very low start-up costs and do not impose annual payout requirements. This stands in contrast to private foundations, which are limited to a charitable deduction of 30% of adjusted gross income, require significant legal and administrative expenses, have ongoing reporting requirements, and mandate annual distributions of at least 5% of fair market value.
These advantages no doubt help explain the remarkable growth of DAFs in recent years. According to the Annual DAF Report of 2025, contributions to DAFs increased 37.3% over 2023, total number of accounts increased by 18.4%, and total assets grew by 27.5%.[2] In many respects, DAFs have become the preferred charitable giving vehicle for high-net-worth individuals and families.
Those benefits, of course, come with an important and often misunderstood tradeoff—and that tradeoff lies at the heart of the Peterson case. Peterson claims WaterStone is liable for “failing to timely honor eligible grant recommendations; imposing unauthorized restrictions; [and] failing to provide accurate and timely accounting”, among other claims. As a result, he alleges breach of contract, breach of the covenant of good faith and fair dealing, negligent misrepresentation, as well as several other causes of action.[3]
Interestingly, the legal landscape at issue in Peterson is not new. Even before DAFs were codified, courts held that donors must relinquish all ownership and control over donated funds, and that charitable organizations retain full discretion to accept or reject any donor distribution requests.[4] Later, federal regulations reinforced this principle. Under Chapter 42, Subchapter G of the Internal Revenue Code, the sponsoring organization is plainly given ownership and control over the account. The donor, on the other hand, is afforded only “advisory privileges with respect to the distribution or investment of amounts held in such fund or account…”[5] It is precisely this relinquishment of ownership and control that produces the charitable deduction.
A careful reading of sponsoring organization materials reveals that this limitation exists. Fidelity, for example, refers to the donation process as “’recommending grants’ because you’ve already made your tax-deductible donation to us.”[6] It appears that, until now, those disclosures have either been overlooked or not entirely appreciated by donors. Sponsoring organizations, for their part, seem to have been reluctant to dishonor donor distribution requests. That dynamic may be shifting.
Peterson has the potential to provide meaningful clarity around who ultimately controls disbursement decisions for funds contributed to a DAF. Regardless of how the case is resolved, it serves as a timely reminder that the documents governing donor advised funds deserve careful consideration. For donors who have incorporated—or are considering incorporating—a DAF as part of their charitable planning strategy, a thorough review of those documents with their attorney and other advisors is not merely prudent; it may be essential to achieving their charitable mission.
Author:
Tamara M. Paulun, JD, CTFA
Director of Advanced Planning and Trusts
E: tpaulun@saxwa.com | P: (574) 348-8813
[1] Peterson v. Christian Community Foundation, Inc., 1:26-cv-00179, D. Ct. Colo. 2026.
[2] Heist, H. D., Vance-McMullen, D., Williams, J., Shaker, G. G., & Sumsion, R. M. (2025). The annual DAF report 2025. Donor Advised Fund Research Collaborative. https://doi.org/10.4087/XUGU3656
[3] Peterson v. Christian Community Foundation, Inc.
[4] National Foundation, Inc. v. United States, 13 Cl. Ct. 486, 493 (1981).
[5] 26 USC Subtitle D, Chapter 42, Subchapter G: Donor Advised Funds.
[6] https://www.fidelitycharitable.org/giving-account/giving-account-details.html.
Disclosure: This summary is for informational purposes and does not constitute investment or legal advice. While Donor Advised Funds (DAFs) offer significant tax advantages , they require the donor to relinquish all legal ownership and control over the contributed assets. Grant recommendations are non-binding, and the sponsoring organization retains ultimate discretion over all distributions. As demonstrated in Peterson v. Christian Community Foundation, disputes can arise regarding successor advisors and grant fulfillment. Please consult with your legal and tax advisors before incorporating a DAF into your charitable strategy.