How DAFs Are Helpful to Advisors' Favorite CharitiesSubmitted by American Endowment Foundation on December 31st, 2018
By Ken Nopar, Senior Philanthropic Advisor
Nearly all financial advisors, estate planning attorneys and CPAs support charities every year. Many are on their boards, part of their professional advisory committees, volunteers or enthusiastic donors. Occasionally, these advisors and nonprofit organizations contact my colleagues or me at American Endowment Foundation (AEF) and ask for advice about how these nonprofits can receive more grants from donors who have donor advised fund (DAF) accounts.
Recently, I was a panelist on a Chronicle of Philanthropy webinar about DAFs. The audience included 700 development professionals from nonprofit organizations who were interested in understanding how to best work with donors who have DAFs. The audience submitted over 150 questions during the hour.
The recent NPT report about DAFs indicated that there are now 465,000 DAF accounts in the country, up from 289,000 a year ago (though individual DAFs within corporate giving programs were included this year). Most nonprofits have received numerous and significant grants from DAF donors in recent years, though five or ten years ago, some charities viewed them as possible threats to their fundraising efforts.
On the webinar, we discussed many steps that the charities can implement that will result in additional or larger donations from these donors. Some of these include:
1. Make it crystal clear that DAF donations are accepted
Nonprofits should clearly indicate on their websites that they accept contributions from DAFs (as well as from private foundations, bequests, appreciated stock, etc.) Most charities still just indicate on their Donation pages that they accept credit card contributions and checks so that is mostly what they receive.
2. Prioritize DAF donations
Numerous studies have shown that donors who have DAF accounts are more generous when recommending grants from those accounts than if they were to write checks, donate by credit card or even when donating appreciated stock.
3. Make vetting easy
List the information on the website that donors can provide to their DAF sponsors so they can quickly vet the organization and forward a check. Provide the tax ID number, address, and contact information for a development staff member should the DAF sponsor need to contact someone with any questions or if they need information to more quickly ACH funds instead of sending checks.
4. Explore all options
When meeting with donors, development professionals may want to ask how they prefer to donate, and if appropriate, determine if they have a DAF or other charitable vehicles.
5. DAFs can now fulfill pledges
Let donors know that the IRS has indicated that DAF sponsors can now fulfill pledges from a donor advised fund as long as the DAF sponsor doesn’t refer to a pledge in the grant letter to the charity. (DAFs still cannot pay for tables or auction items.)
6. Show appreciation
Charities should thank and engage DAF donors every time a grant from their fund is received. If a donor has taken the time to establish a DAF, they are likely interested in and serious about philanthropy. Charities should invite the donor for a site visit, volunteer or fundraising events. Though it’s difficult to know the size of a donor’s DAF account, it’s worth following up even if the initial grant is small.
7. Don’t neglect anonymous donors
Only about 5 percent of grants from DAFs are anonymous, but charities should nonetheless send thank you notes to any anonymous donors c/o the DAF sponsor and request that it’s forwarded. Though AEF is glad to do this, unfortunately, many DAF sponsors do not. Regardless, it’s worth the small effort and can lead to continued donations and additional opportunities.
8. Understand how DAFs are helpful with large or complex gifts
Many charities appreciate that some donors may not feel comfortable in donating a large asset or amount at one time to them. By donating these to a DAF sponsor, they still intend to make grants, but they’re able to do this over time instead of fearing that they have to give it all at once. Because the DAF sponsor does all of the work of accepting more complex assets, charities can save more time and effort. and can simply receive the grant checks from the donor advised fund.
9. Parting gifts
As many nonprofits request direct bequests from the estates of donors, they can also ask their donors with DAF accounts to direct a final grant upon their death from their donor advised fund.
10. Engage the next generation
Because many DAF accounts will continue after the donor’s death and their heirs will be the successor donors, charities should seek to engage this next generation of DAF donors.
11. Follow the rules
When sending a thank you letter to a DAF donor, remove any tax references since they received the deduction at the time they donated to the DAF and not when the grant was made. Some donors just turn over all thank you letters to their CPAs for their direct donations as well as grants from DAF accounts, so it’s important that CPAs don’t unintentionally claim a deduction for grants from DAFs.
Charities are increasingly welcoming grants from donors who have DAF accounts. Those organizations which understand how to welcome and cultivate DAF donors will benefit from more frequent and larger donations, while those who don’t will miss an opportunity. Because advisors have been very instrumental in the growth of the popularity of DAFs, they can be very helpful in sharing some of these suggestions with the charities they support.
At American Endowment Foundation, we look forward to discussing the many ways that a donor advised fund can help donors and the advisors who serve them deliver a stronger charitable impact. Contact us or call at 1-888-660-4508 to learn more.
This article originally appeared in WealthManagement.com