Why Your Clients Should Discuss Their DAF Accounts with Their Successor Advisors Now

By Ken Nopar, Senior Philanthropic Advisor

Largely because of the COVID 19 pandemic, many clients have begun to review and update their estate plans. It is also an ideal time for those who have donor advised fund (DAF) accounts to consider whether their DAF succession or disposition plan is still appropriate, if they should make any changes, and to talk with their successor advisors about the fund.

Because most clients plan to pass these accounts on to their children and heirs, it is always surprising to hear the reactions of the successor advisors when AEF notifies them about the existence of the DAF account after the deaths of their parents, relative, or friend who established them. Unfortunately, about 75% of these people had no idea that they would now be responsible for making grants to charities from an account that they did not even know existed.

Some of the questions we hear upon notification are:

1. " What is a donor advised fund?"
2. " How much did you say is in the account?"
3. " Can I just keep and spend that money myself?"
4. " My parents left that much money for charity and only left me _________? "
5. " What happens if I have no idea which charities to give money to?"

What should be an uplifting conversation when we tell successor advisors that they are able to give away money from an already-funded account to their favorite causes and charities, can instead become one that unnecessarily creates confusion and consternation. 

When clients initially create a DAF, they indicate whether at their deaths the assets in the account will be distributed to charities of their choice or whether their successor advisors will continue to make grants from the account. 

Since so many want their accounts to continue, those who have created the DAF should discuss the account with the successor advisors in order to prepare them and allow for a positive experience later. Some of the many benefits to clients and advisors include:

1. Many families have been well-served by their advisors, and hope that their children will continue to work with them so these charitable assets can continue to grow and support the philanthropic efforts of the family. Families who include the advisors in these conversations can help increase the likelihood of this happening. 
2. Successor advisors are more likely to continue to support some or all of the charities the DAF creators have funded
3. It is an opportunity for clients to discuss with their children why charitable giving is important to them and why they support specific causes and charities. 
4. This discussion can enable clients to pass down charitable values to their children and grandchildren, and if desired, they can even include them in giving decisions now so they can be better prepared to give later.
5. It can become a way for families to remain united after the deaths of their parents, as the children can continue to donate together to honor the memories of their parents. 
6. Some families may continue to make some grants together after their parents’ deaths, but because children may live in different areas or have different beliefs, they respectfully may make separate grants or create separate DAF accounts from which they can each give. Planning ahead to discuss various options is helpful and can help minimize potential stress and unease.
7. When told in advance that a certain amount has been set aside for charitable giving instead of for taxes or as part of an inheritance, heirs are much more understanding. This is especially true when assets from IRAs are donated to DAF accounts at death, thereby eliminating significant taxes had these retirement assets been passed down to heirs.

Since the contact information for their successor advisors may change over time, donors should provide updates to AEF by submitting a change form. 

For donors who are looking for help to develop a charitable mission or plan, engage their family, understand how to evaluate charities, or how to give with impact, AEF’s Library for Donors can be very helpful. Should this content or conversations with their advisors prove to be insufficient, advisors may want to bring in philanthropic advisory firms to help their clients begin to achieve their philanthropic goals. 

Having this conversation with successor advisors in advance will lead to many positive developments later when the account is transitioned to them. Instead of responding “What Is A DAF?,” successor advisors will instead already be knowledgeable or at least know which questions to ask so the grant making can continue seamlessly. 

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.

An earlier version of the article originally appeared in Financial Advisor.