You may have heard the term “Liquidity Account” before but are unsure how it affects your donor-advised fund (DAF). Keep reading to see what this term has to do with the assets held by a DAF sponsor like American Endowment Foundation (AEF).
What Is a Liquidity Account?
The Liquidity Account holds a small portion of assets held by AEF, designed to facilitate the withdrawal of quarterly administrative fees without disrupting investment activities.
The Liquidity Account is replenished annually.
How It Works
When a DAF is established, AEF typically pulls an initial contribution of 1% of the fund’s balance to the Liquidity Account. The remaining assets are invested in the Investment Account.
- Quarterly: AEF assesses and withdraws its administrative fees from the Liquidity Account.
- Annually: AEF requests liquidity replenishment for all funds via a Letter of Authorization (LOA).
Where It’s Held
Liquidity Accounts are maintained in cash equivalents, such as money market funds or short-term U.S. Treasuries. Earnings are credited to each DAF on a monthly basis.
For questions about your Liquidity Account, please contact us at 1-844-235-2331.