Establish Placeholder Funds, Avoid the Year-end Crush

American Endowment Foundation (AEF) expects year-end to be extremely busy with advisors opening a huge number of new donor advised fund (DAF) accounts in Q4. There have already been a record number of new account openings, markets are at all-time highs, and client awareness and interest continues to grow. Every November and December, advisors and clients rush to open DAFs, and the pressure upon advisors and their associates and clients to rush to submit and process everything before the deadlines is enormous, yet this is often unnecessary.

Placeholder funds at AEF have become a very popular tool for advisors who do not enjoy this year-end crush. Nearly 20% of AEF DAF accounts begin as placeholder funds. They are a way, without charge, for advisors and their clients to complete, approve, and submit the regular DAF application to AEF in advance but simply check the Placeholder funds box on the application.

Placeholder funds should only be used when donors are very serious about opening DAF accounts. Ideally, DAF accounts should be opened and funded as part of one process, but for those clients who want to open DAFs soon but are just not able to decide which assets or how much to donate, these are a great way to at least get the application out of the way and enable AEF and advisors to begin the process of establishing the account.

If clients indicate that they may open a DAF account in a year or two, a placeholder fund is not appropriate, but if the funding will take place in the next several weeks or a month or two, this can save much time and frustration later. Please note that the placeholder fund is not to be confused with the AEF Legacy Fund which is to be funded at the death of the donor.

Many clients may want to open accounts at the last minute and also make grants to their favorite charities at the end of the year, but unfortunately, this is often not possible because the process takes longer at that time. Opening DAF accounts earlier will help advisors, their clients, and the charities the clients wish to support.

At American Endowment Foundation, we look forward to helping donors and advisors determine the best strategies for their charitable giving. Please contact us or call at 1-888-966-8170 with any questions.