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 or professional advisory committees, while others are volunteers or make financial contributions.
These and other non-profits continue to receive more and significant grants from their donors’ donor advised fund (DAF) accounts. As recently as five years ago, some charities viewed DAFs as possible threats to their fundraising efforts, but now they welcome those grants that their donors recommend.
Because they realize that there are now over 350,000 individual DAF accounts in the country, some non-profit organizations, as well as advisors who support them, occasionally contact my American Endowment Foundation(AEF) colleagues or me and ask for advice about how they can receive more grants from donors who have DAF accounts.
There are many steps that the charities can implement that will result in additional or larger donations from these DAF donors. In order to be helpful to these organizations, AEF provided a column to The Association of Fundraising Professionals (AFP). Please feel free to share these suggestions and observations that were in the AEF AFP column:
1. Make it crystal clear that DAF donations are accepted
Non-profits 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 websites 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 so they can more quickly ACH funds instead of send 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 DAF accounts as long as the DAF sponsor does not 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 DAF is received. If a donor has taken the time to establish a DAF, they are likely interested in and serious about philanthropy. They should invite the donor for a site visit, volunteer event, or fundraising event. Though it is difficult to know the size of a donor’s DAF account, it is worth following up even if the initial grant is small since many DAF accounts are large.
7. Don’t neglect anonymous donors
Only about 5% 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 is forwarded. Though AEF is glad to do this, unfortunately, many DAF sponsors do not. Regardless, it is 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 to the charity, but they are able to do this over time instead of fearing that they have to give it all at one time. Because the DAF sponsor does all of the work of accepting more complex assets, charities can simply receive the grant checks from the DAF instead of investing much time and effort in processing the complex assets.
9. Parting gifts
Though many non-profits 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 fund.
10. Engage the next generation
Because many DAF accounts will continue after the donor’s death and their heirs will be the successor advisors, 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 from charities to their CPAs for their direct donations as well as grants from DAF accounts, so it is important that CPAs do not unintentionally claim a deduction for grants from donor advised funds.
Charities increasingly welcome 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 do not may miss opportunities. By sharing these suggestions with the charities they support, advisors can be very helpful to these organizations.
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.