Donor Advised Funds
Are you baffled about Donor Advised Funds, or at least about how to cultivate and solicit them? If so, I will explain here six ways you can promote donor-advised fund giving.
So what is a donor advised fund? The primary benefit of a donor-advised fund (DAF) is that it allows someone to donate assets for charity today – and receive a tax deduction now – even though the actual funds may not be granted to your charity until later on. In other words, the donor-advised fund essentially enables the donors to receive a tax deduction when the money goes into the DAF, while the donors decide when the assets will finally leave the DAF and actually go to your charity. In the meantime, the assets inside a donor-advised fund grow tax-free.
Of the estimated $358 billion in annual charitable contributions in the U.S., donor-advised funds receive more than $19 billion. Overall, the share of total giving going to donor-advised funds has been increasing since at least 2007.
Here are six ways to promote donor-advised fund giving:
Promote the use of the DAF as a conduit for appreciated stock donations.
You may of course want your donors to donate appreciated stocks directly to your nonprofit, but if you don’t have the infrastructure to receive those assets then the donor-advised fund could be promoted as a “conduit.” In this case, the appreciated securities are donated to the donor-advised fund, which liquidates the investments (tax-free at that point), and then subsequently makes a cash grant to your organization.
Promote the DAF as a way for gifts to be made anonymously.
Some donors wish to give anonymously because they just don’t want to be attached to the gift for donor recognition purposes, or they’re concerned that a large public gift will lead them to being solicited by more organizations, or for general philosophical reasons. Yet making donations anonymously can be difficult to execute. With a donor-advised fund, the donor can make the donation to the fund and allow the sponsor of the fund, Vanguard or Fidelity or the like, to facilitate the gift to your nonprofit on an anonymous basis.
So given these six points, I suggest that you consider hosting a gathering of your DAF donors as a donor education session to facilitate a discussion with them about their DAF. You see, many donors have set up a DAF because their financial advisor told them to, but they know little about how their DAF can meet your funding needs. It’s your job to educate them!
You can secure your share of the massive DAF pie if you follow these six steps.
What has been your challenge, or success, in working with DAFs? Leave your comments at the blog.