How Advisors Can Help Clients Maximize Their DAF Impact

Succession or disposition plans for clients’ DAF accounts were often set up at the time of initial funding and probably haven’t changed since, yet most DAF sponsors don’t remind donors to review or change them. Some donors initially may have named their child as the successor advisor, but that child may not be aware they were named, may no longer be interested or may support different causes than the parents. Others may have named a charity as the beneficiary of the DAF, but they may now support different charities. Others may never have specified a successor or disposition plan, so the DAF sponsor would determine how to distribute the assets in the account after the donor’s death. These plans should be checked and can be easily changed without charge.

Donors may have initially contributed cash or publicly traded stock to fund the DAF, and they may not be aware that other assets they have, such as real estate, privately-held business interests (for example, C corporation or S corporation shares) or cryptocurrency can be donated.

With tax law changes, many donors may now want to periodically bunch their contributions to their DAF accounts instead of donating every year.

Many donors approaching retirement may want to make larger contributions to their DAFs while their income is high, so the tax deduction can be more significant than if they did so in retirement. Donating while working will enable them to continue making generous grants in retirement.

Some donors may want to name their DAF as the charitable beneficiary of their retirement accounts to avoid significant taxes should their heirs be the beneficiaries.

There may now be different investment opportunities within their DAFs than when they established the accounts. Additionally, many DAF sponsors now allow their donors’ financial advisors to manage the assets in the accounts.

Donors may not be aware of how the DAFs can be used. While DAFs can’t be used to purchase seats at a gala, they can be used for paddle raises at events. DAF grants can often be used to fulfill pledges as long as the DAF sponsor doesn’t reference the pledge in the grant letter to the charity. Finally, DAF grants can typically be used for annual synagogue dues or memberships at other organizations, provided that they don’t receive any impermissible benefits such as free parking, tickets to events, or other perks.

Most DAF sponsors allow donors to schedule grants in advance and on an ongoing basis, so they don’t have to remember to send them out.

Many charitable organizations are swamped with year-end donations, so DAF donors should be encouraged to send grants throughout the rest of the year when the organizations have great need. This timing also allows both donors and grantees to have more substantial interactions and enables the organizations to fully express their gratitude, invite donors for site visits and share information about the impact of the grants.

Some DAF donors may wonder how their DAF sponsor helps them other than to facilitate their grant recommendations. Some DAF donors may want the DAF sponsor to help educate them on best practices for giving, getting their families involved or identifying giving opportunities in their local or national communities. Some DAF sponsors allow their donors to pay outside philanthropic advisors to help them achieve their giving goals, while others don’t.

If a DAF sponsor rejects a donor’s grant recommendation without a satisfactory explanation, provides substandard service, charges high fees or offers poor investment options, donors are usually able to transfer their DAF to a different DAF sponsor. Some donors have a few DAF accounts with different sponsors because sponsors may not allow grants to certain causes, charities or geographic regions, offer different successor or disposition plans or have different grant or account minimums.

If donors have never recommended a DAF grant or only use them infrequently, advisors should encourage their donors to use them regularly. Otherwise, clients may still be writing personal checks to charities or donating by credit card. Additionally, most DAF sponsors have minimum granting requirements that could force donors to make grants or close accounts. Once in the habit of granting from a DAF, donors will appreciate the ease of use and recommend grants more often.