You Helped Your Clients Establish DAF Accounts. Now What?

By Ken Nopar, VP-Senior Philanthropic Advisor

_{An earlier version of this article was published in ThinkAdvisor.}

Once again, advisors helped clients open donor advised fund (DAF) accounts in November and December. Fortunately, many clients opened them earlier in the year when their advisors recommended that they do so. Others, however, waited until the last minute to open the accounts, causing unnecessary stress for the advisors and donors and resulting in some missing account opening deadlines and the opportunity for a large tax deduction.

Opening the account is just the first step, however, as some clients need help and direction in determining what to do next. Nearly all have charitable intent and most know which causes and charities they want to support from their DAF account, but many would welcome input from their advisors now that they have a new charitable vehicle.

Establishing a DAF account often enables donors to feel a greater sense of pride and satisfaction with their charitable giving both now and in the future. Advisors can be very helpful to their clients who set up their DAFs in recent weeks, months, and even the past year by suggesting that they do the following:

1. Create a mission statement or statement of purpose, and determine the goals of their charitable giving.
2. Consider why charitable giving is important to them.
3. Contemplate whether leaving a charitable legacy is relevant.
4. Decide who will be involved in making grant recommendations from their DAF account now.
5. Discuss who the successor advisor(s) will be if the account is to continue after the death of the original donors.
6. Determine at what point or age the children or heirs will become involved or be named the successor advisor.
7. Clarify if there will not be successor advisors whether the DAF will be for a limited period during lifetime, terminated at the donor-advisor’s death with the assets distributed to charities, or continued for some time after death with the assets being granted to charities on a prescribed timetable.
8. Discuss whether they want to support many different causes and charities or just a few.
9. Decide if they want to schedule some repeated grants in advance.
10. Identify which charities they want to initially support and determine how much they should grant to each.
11. Determine in which situations they want to make grants publicly or anonymously.
12. Talk with their advisor to determine how much they should contribute to their donor advised fund account every year and in the future.
13. Identify with their advisor additional managed and unmanaged assets that they could donate to the DAF in the future, and whether illiquid assets like privately-held stock, cryptocurrency, real estate or insurance should be considered.
14.  Discuss how the advisors should invest the assets in the DAF account. If clients set up a DAF account on their own with a DAF sponsor that does not allow their advisor to be involved, or only at a high minimum amount, determine how the account can be transferred to AEF so the advisor can manage these assets.
15.  Talk about whether they want to visit the charities they support, meet with leadership or development staff, volunteer, or determine how to evaluate if they should continue to support these organizations in the future.
16.  Discuss the advantages to their grantees and themselves of making their grant recommendations at times other than year-end.

Additional advice for AEF donors can be found in AEF’s Library for Donors. Should clients need further guidance or if they are reluctant to discuss these matters on their own or with their advisors, they may want to engage the services of a philanthropic advisory firm to help them achieve their charitable goals.

There will always be a charitable giving year-end rush for the population at large, but donors with DAF accounts or other charitable vehicles are more strategic and likely to send out their grants sooner. When appropriate, advisors should discuss with clients the benefits of donating to their DAF and making grants from their DAF earlier in the year. Prior to opening the account, clients may have been used to making their year-end charitable donations to receive the tax deductions, but some clients who open DAFs forget that there is no longer a rush since they receive the deduction when they contribute to the DAF and not from the DAF.

Clients will welcome this discussion, and they will then be able to make charitable decisions with more confidence and clarity than before. Even clients who have used a DAF for years welcome the conversation as they may have experienced changes in the amount or direction of their giving in recent years.

We at American Endowment Foundation look forward to discussing your needs and interests in greater detail. Contact or call us at 1-888-660-4508 and let us discuss how donor advised funds can play a role in your financial practice.