Helpful Suggestions for Donors Who Have Created Donor Advised Fund Accounts
by Ken Nopar, Senior Philanthropic Advisor, AEF
Donors established a record number of donor advised fund (DAF) accounts during 2017. The number of accounts opened at AEF increased by 70% during the year with many of these in December.
It may be natural for those of you who hurried to make your donation at year-end to breathe a sigh of relief that you received the tax deduction for 2017. Though the tax deduction is important, nearly all of our donors who made the decision to fund and create a DAF did so primarily because of a desire to support the causes and charities that are very important to them.
Establishing the donor advised fund account is just one step. For many of our donors, the next step is to determine what to do at this point. Establishing a DAF account and creating a plan often enables our donors to feel a greater sense of pride, satisfaction, and accomplishment with their charitable giving both now and in the future.
Therefore, it may be very helpful for those of you with new DAF accounts, as well as those of you have previously established one, to do the following:
- Determine the goals of your charitable giving and develop a mission statement or statement of purpose.
- Discuss whether you want to support many different causes and charities or just a small number.
- Contemplate why charitable giving is important to you and whether leaving a charitable legacy is relevant.
- Decide who will be involved now in the charitable giving process, and at what point children or other family members should become involved.
- Clarify whether the DAF account should be for a limited time basis or should be continued for many years or generations after your death.
- Discuss who the successor advisor(s) should be to the account if it is to continue, and perhaps at what age any younger children should be named the successor advisors.
- Determine how much you want to grant to various charities from your donor advised fund account and whether you want to schedule repeated grants in advance.
- Evaluate how much you should contribute to your donor advised fund account every year and in the future. Identify additional assets that could be donated in the future and whether illiquid assets like privately-held company stock, farmland, vacation or primary home, other real estate, or insurance should be considered. Most of our donors consult with their financial advisor and CPA to determine what’s most appropriate.
- Discuss with your financial advisor how the assets in your DAF account should be invested.
- Discuss whether you want to meet with the leadership of the charities you support, conduct a site visit, volunteer, and decide how to evaluate whether you want to continue to support these organizations in the future. We encourage donors to be sensitive to the demands upon the organizations’ staff if their grants are not significant.
- Determine in which situations you want to give from your donor advised fund account publicly or anonymously.
- Consider how formal a process you wish to utilize when determining where to give and who will be involved, and discuss whether you want to make your grants at different times of the year or just at one time. Since charities need support throughout the year, most AEF donors do not wait until December when the organizations are busy receiving many checks and other donations from people who do not have charitable vehicles.
There is excellent information available for our donors under the Education and Resources section on the Donor page of the AEF website. Much of this has been written by leading charitable experts in the country.
Occasionally, our donors may need the input or guidance of a philanthropic advisory firm to help them with some of the above items. These independent firms do not provide financial, legal, or tax advice, and often work with donors who are beginning their charitable journey or with those who need or want to change direction. Please refer to our Philanthropic Advisory Firm Referral Program for additional information.
Thank you for selecting AEF to be the donor advised fund sponsor of your giving account. We hope that your decision will enable you to achieve all of your charitable goals. Please contact us if we can be of additional help.