Many donors choose to open donor-advised funds (DAFs) during retirement or right before. The Donor-Advised Fund Research Collaborative (DAFRC) noted in their 2017-2020 report on patterns and trends that most DAF donors are between 60-75 years old. However, the 2024 DAFRC report, which includes data through 2022, updates the number to 55-80, suggesting a widened age group and an overall expansion of DAF popularity.
While the average age may be steadily expanding, with many people opening DAFs while they’re still working, the fact remains – DAFs offer a wealth of benefits for older donors and anyone looking to expand philanthropy.
Retirement-age donors may appreciate DAFs because:
- DAFs Are Simple to Use
- They Can Donate Assets While Still Working
- Their Advisors Can Manage and Grow DAF Assets
- They Can Donate Funds From a Liquidity Event
- They Can Donate More Complex Assets
- They Can Set an Example for Their Children & Other Heirs
- They Can Name a DAF as the Charitable Beneficiary of Their Retirement Accounts
- They Can Convert Previously Established Private Foundations to DAFs
By understanding these factors, donors can decide if a DAF is right for them, and financial advisors can engage senior clients to ensure they have all the information they need.
8 Reasons Older Donors Prefer DAFs
Regardless of when donors decide to open DAFs, they enjoy their flexibility. DAFs can grant out to charities soon after they’re established – and in the decades to come. Additionally, many people use their DAF as an opportunity to leave a charitable legacy and set up their heirs as successors.
There are numerous reasons why DAFs benefit older donors, including:
1. DAFs Are Simple to Use
Donors can receive one tax receipt for all contributions made to their DAF – no need to keep numerous receipts like they would when donating to various charities. Most DAF sponsors also offer an online portal where donors can suggest grants from the DAF and view past granting history.
2. They Can Donate Assets While Still Working
Many donors like to donate assets before retirement while their income is still high. This often allows them to receive a more significant tax deduction than they would after retiring.* Then, even when their income is lower, they’ll still have assets in the DAF that can be granted to causes important to them.
3. Their Advisors Can Manage and Grow DAF Assets
Many DAF sponsors allow financial advisors to manage the assets in their client’s account. Some may have minimum fund amounts required, while others allow for full customization of the DAF portfolio – always ask the DAF sponsor for clarification. Having a trusted financial advisor at the helm can give donors peace of mind.
4. They Can Donate Funds From a Liquidity Event
When donors sell assets, such as from the sale of a business, or receive an inheritance, they often want to donate a significant portion of the funds. However, they may not want to give it all at once to a single charity – the organization’s mission or leadership could change, or they may encounter difficulties. Donating to a DAF allows for the flexibility of granting over time.
5. They Can Donate More Complex Assets
Older donors may have non-cash assets they’d like to donate, like business stock, life insurance, limited-partnership interests, real estate, or cryptocurrency. Some may even want to support charity with works of art from their collection. A DAF makes this process easier, especially when charities are unable to accept such assets directly.
6. They Can Set an Example for Their Children & Other Heirs
Very often, donors like to use their DAF as an opportunity to involve their families, including children and other heirs, in charitable giving. It’s a way to establish the importance of philanthropy for the family. Control of the DAF can also be passed down, allowing those giving traditions to continue with funding already in place.
7. They Can Name a DAF as the Charitable Beneficiary of Their Retirement Accounts
As donors age, they consider what will happen in their absence. Taking care of family is usually the utmost concern, but after that, many want to leave their mark on causes that are meaningful to them. A DAF can be set up as a charitable beneficiary on retirement accounts, distributing funds to the DAF upon the donor’s passing. This can also help reduce the tax burden on funds received by heirs.*
8. They Can Convert Previously Established Private Foundations to DAFs
Charitably minded individuals may have set up private foundations at any point in their lives. However, as retirement approaches, donors often grow weary of the complexities and restrictions surrounding their operation. They may opt to convert the private foundation to a DAF for easier granting.
A donor’s charitable assets may not comprise the bulk of their estate, but they are often most important to them. Engaging in charitable planning conversations with their financial advisor and family can help donors give more efficiently – and with greater impact.
Philanthropy Is for All Ages – Expand Your Charitable Mission With AEF
As donors get older, they may be concerned about how much they can donate and pass wealth on to future generations. Effective planning can help all donors achieve their personal goals and expand their charitable mission. Think a DAF should be part of your legacy of giving? Reach out to American Endowment Foundation.
NOTE: An earlier version of this article appeared at Rethinking65.
* The information provided herein is for informational purposes only and should not be interpreted to constitute legal and/or tax advice. Donors should consult their legal and tax advisors regarding their specific situations.