When Your Client Opens a Donor Advised Fund ...Without YouSubmitted by American Endowment Foundation on January 8th, 2018
By Eric Kinaitis
For some financial advisors, the decision that their client decided to open a donor advised fund (DAF) catches them by surprise. From learning that their client used cash (instead of appreciated assets such as stock or mutual fund shares) to discovering that the investable assets now exist in pooled funds (providing the advisor little to no discretion on how to manage those assets), the decision to give money away to charitable efforts can be an unwelcome piece of news.
How could have this been avoided? Unfortunately, the client may not have realized the assistance that their financial advisor could have offered. Unless an advisor has shown interest and expertise in charitable planning, their client may not have realized the help that could have been available to them.
So now that your client opened a DAF on their own, a few questions that you can ask to better understand the details about what they got involved in:
- What fees does the DAF administrator charge to oversee the fund?
- Was there a set-up fee to start the fund?
- Is there a termination fee to close the fund?
- Does the DAF administrator require any of the assets from the donor’s fund to be used for its own charitable agenda?
- Can the donor make grant recommendations to any charitable interest they wish?
- Does the DAF administrator have restrictions on grant distributions i.e. geographic, religious, programmatic, etc.?
- Is there a minimum annual distribution requirement that the donor must give, or a maximum annual limit that restricts how much they can give away?
- What are succession plans? Can the family of the donor remain involved after the original donor dies? Or does the DAF administrator take control and discretion over the remaining assets left in the donor’s fund?
- What investment choices exist?
- Are contributions held in pooled funds (meaning that the dollars are pooled with other donors for investment purposes?) Or can the dollars be separately managed in their own investment account?
- What types of assets are eligible for contribution?
- Do contributed assets have to be liquidated immediately?
- Does the DAF allow transfers to other donor advised funds, or are the funds held permanently by the initial DAF administrator?
These questions and others are ones that your donor-client hopefully has asked and knows. If they don’t, these questions may prove the opportunity you as the financial advisor may be looking for.
By helping your clients think through the additional details of the DAF they chose on their own, you may be able to guide them to alternative DAFs that may better serve their interests.
Together, the donor and the advisor can determine and evaluate the differences between DAF programs and make a choice that serves the donor while allowing the valued oversight of their financial advisor to continue.
Transferring assets from another program to American Endowment Foundation is easy. 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.