by Ken Nopar, VP-Senior Philanthropic Advisor

American Endowment Foundation (AEF) receives many inquiries from donors and their advisors about whether or how they can leave a bequest to their AEF DAF or if they can name their DAF as a charitable beneficiary of their retirement plan. Some of the recent interest stems from the COVID pandemic and the large number of donors who have updated their estate plans in the past year, but the trend started previously as donors increasingly seek to donate more to charity and avoid significant taxes at death. Recently proposed tax law changes has already created additional interest which will grow even more if these are passed.


Traditionally, many donors would specify individual charities in their estate plans, but as donor advised funds have become so popular, many are now naming their DAFs instead. One of the primary reasons has been that DAF donors now understand that they can quickly and easily change the charitable beneficiaries of their DAF accounts themselves without needing to incur any legal or other fees to revise their estate plan.

If donors want to leave a bequest to their AEF DAF account in their estate plans so their successor advisors can continue to grant from their account, they should reference the Bequest section on the AEF website so they have the necessary information to give to their estate planning attorney. If they are certain that they want to instead leave a bequest to a particular charity, they should contact that charity so they can provide that information.

Retirement Accounts

Donors are increasingly donating retirement accounts to DAF sponsors at death to avoid significant taxes on the distribution of these assets to heirs and so the full amounts can be used for charitable purposes. Some donate the entire amount to the DAF while others donate a portion.

Not all IRA administrators are alike, as some limit the number of charitable beneficiaries that can be named. If numerous charities are indeed able to be listed, families may need to follow up to make sure that the organizations have received the checks. As a result, DAF sponsors have been named as the sole beneficiary of IRAs to help heirs avoid this extra work and responsibility, as the DAF sponsor will ensure that the grant checks are sent and received.

There may be additional considerations when donors name a DAF sponsor, or even another charity, as the beneficiary for their 401(k) plan. They should first check with the 401 (k) plan administrator to verify that the plan allows for a charitable beneficiary, as some may not. Some administrators may require a client’s spouse or partner to consent to naming another beneficiary. If this is not allowed, the client may wish to roll over the 401 (k) account to an IRA at the appropriate time so they can have full control over naming their preferred beneficiary.

Other Considerations

Though a very high percentage of DAF donors select successor advisors to continue their DAF account after they are no longer living, some elect to terminate the DAF at their death and grant out the assets to one or more charities then. Others specify that AEF should send out some grants at death with the remainder staying in the account so the successor advisor(s) can continue to make grants in the future.

To ensure continuity and help families transition their giving from one generation to another, AEF has prepared Why Donors Should Discuss Their DAF Accounts with Their Successor Advisors along with other pieces in the Library for Donors on the website.

By planning in advance and making bequests and/or donating retirement assets to their DAF sponsor or to other charities at their deaths, donors can create an even greater impact upon the causes and charities that are important to them. Heirs are usually pleased to learn about these plans especially when consulted or notified in advance.

Regardless of whether charities will receive a direct bequest or a grant from a donor’s DAF after death, they will appreciate knowing about the gift in advance so they can properly thank the donor during their lifetime. This may also allow the charities to meet and engage their donors’ heirs so the family tradition of supporting the charity can continue.

AEF strongly encourages donors to talk with their trusted financial, tax, and legal advisors before making any changes to their current plans, and if plans have not been made, to engage in these conversations in the near future. If a DAF has not yet been established, it is helpful for a donor and advisor to set up a Legacy DAF in advance which will be funded at death. No fees are charged until the Legacy DAF is ultimately funded.

Together with their advisors, donors will be able to make proper decisions about when, where, how, and how much to donate so they can make the impact that they desire.