The Ease of Transferring an Existing Donor Advised FundSubmitted by American Endowment Foundation on March 26th, 2018
By Eric Kinaitis
In 2017, over $36 million in assets were transferred from other donor advised fund administrators to American Endowment Foundation (AEF). Why?
Current financial advisors have shared a variety of reasons, including:
- The fees can be lower when compared to some community foundations around the country.
- “ My clients appreciate the flexibility & transparency that AEF offers. Separating the administration of the donor advised fund (DAF) from the investment administration within the DAF is important. That unbundling of pricing is appreciated by my clients," said a Wells Fargo advisor practicing in Virginia.
- An advisor based out of Atlanta shared a similar viewpoint: “I can manage the assets in an AEF DAF the way my client wants them managed. I can keep the investment strategy consistent with their other personal investments.”
- For some advisors, the ease of managing the investments held in an AEF DAF on their familiar custodial platform was a primary reason for the switch from another administrator.
Regardless of the reasons for switching, selecting the best choice in the first place for a donor and their trusted advisor may be the better choice than having to switch at some point in the future.
The following checklist covers 7 tips that a donor and their advisor should consider when deciding on a donor advised fund:
Tip #1 Affiliations
Is the organization that sponsors a donor advised fund affiliated with another entity (for-profit or non-profit), or is it independent? How might these affiliations help or hinder the donors’ use of a fund now or in the future?
Tip #2 Contributions
What types of assets are eligible for contribution, e.g. cash, marketable securities, closely held securities, real estate, and life insurance? In some cases, the best opportunity that a donor has to give is through the donation of illiquid assets. Is there a requirement that the contributed asset be immediately liquidated?
Tip #3 Investments
What investment choices are available? Are contributions pooled (meaning that the dollars donated are pooled with other donors for investment purposes?) Or can the dollars be separately managed in their own investment account? Can the financial advisor play an ongoing role in providing investment services for the donor advised fund?
Tip #4 Grant Distributions
Are there restrictions on grant distributions, i.e. geographic, religious, etc.? Is there a minimum annual distribution requirement that the donor must give, or a maximum annual limit that restricts how much the donor may want to give away?
Tip #5 Succession
How flexible are the provisions for succession upon the death of the donor? Is involvement limited to the donor and their spouse? Or can the donor name other successive advisors such as children or other individuals of their choice?
Tip #6 Online Access
Does the program offer the ease of secure online access to the fund account?
Tip #7 Costs
Is there a set-up fee or termination fee? What is the annual administrative fee? Are there hidden fees in the fine print, such as minimum account level charges? Does the organization require a certain portion of the fund to be set-aside for its own purposes? Most importantly, will they allow a transfer of the fund in the future to another DAF administrator, or are the assets held permanently by the initial administrator?
By thinking through these tips, a potential donor and their financial advisor can determine and evaluate the differences between DAFs and make a choice that can serve the interests of the donor while allowing the valued oversight of their advisor to continue. To learn more about the transfer process, access our transfer guidelines.
At American Endowment Foundation, we look forward to helping donors and advisors determine the best DAF choices for their interests. Please contact us or call at 1-888-966-8170 with any questions.