What’s up with Donor-Advised Funds?

daf

by: David Gee, Associate Vice President, HUB Philanthropic Solutions

 You can find a great deal of useful and compelling information in the recently released Giving USA 2016 Report, including that fact that 90% of the estimated $373.25 billion in charitable giving came from individuals (71% Individuals, 9% Bequests and 10% Family Foundations) and that only 5% of overall giving was from corporations.  As always, the Giving USA Annual Report offers development officers and non-profit executives helpful ideas in how to most effectively allocate resources in your next development plan and in making the case with your Board to shift more of your focus and energies in the direction of individual giving.

But there was one particular data point that jumped out at me… over the past 25 years, giving to Donor-Advised Funds (DAFs) has increased by over 12,000%. While it is true that DAFs have been around since the 1930’s, their growth and popularity in the philanthropic landscape is much more recent and, in fact, according to the Giving USA 2016 findings, DAFs accounted for 5.5 % of all philanthropy in 2015.

So, how can you target your fundraising efforts with regards to DAF donors?

First, familiarize yourself with the advantages of donor-advised funds and, just as important, policies and restrictions associated with DAFs so you’re not asking or permitting your donors to make grants that aren’t allowed. DAF grants to a charity must be solely for the benefit of the charity.

When making a contribution to their DAF, donors are able to claim the full amount as a tax deduction because they do not receive anything in exchange for the contribution. (They also receive their tax-letter from the DAF-sponsoring charity at this time.) That’s why DAF grants to purchase tickets or a table for a charitable event is generally not permitted, as they would be receiving goods or services in return for the contribution. Fulfilling pledges with DAF grants is also prohibited so, if you are in a multi-year campaign, you’ll need to work with donors who want to support the effort through their DAF (e.g., they can still make annual gifts to the campaign, just without a formal pledge).

Once you have a handle on DAF’s, be sure to promote that your organization accepts DAF grants:

  • Include a DAF-giving checkbox on your gift forms and fundraising materials
  • Make it clear that you welcome DAF grants on your online giving form
  • Share stories about DAF donors in your newsletter or as a testimonial on your website

 And most importantly, talk to your donors about how they give. Ask them if they have a DAF. Beyond checks and credit cards, today’s donors have multiple giving vehicles to choose from – stocks, private foundations, donor‐advised funds, trusts, and more – sometimes using a variety of options to support their philanthropy. Ask your donors how they give, why they selected that method, and how your organization can make it easier for them to support you. If they have a DAF, this question may actually lead to your donor making a larger gift and, if they don’t have one, your question presents an opportunity to provide valuable information by educating them about DAFs.

And don’t forget to recognize your DAF donors. The truth is, some of your current donors and prospects are using DAFs, maybe not with you, but there’s no question they have DAFs. When a donor recommends a grant from their DAF, the funds come from the charity that sponsors the DAF program. (Chicago Community Trust, Fidelity Charitable, National Philanthropic Trust, etc.) Usually the donor’s contact information will be included with the contribution. (According to Fidelity Charitable, the largest DAF in the country, approximately 91% of their donors disclose their information to be acknowledged.) So, unless the gift is made anonymously, follow up and acknowledge the donor’s gift, even though you won’t be sending them the traditional tax letter. If this is the first time they have made a DAF grant, ask what prompted them to do so or maybe discover if the family is involved in the fund and invite everyone for or tour or meaningful volunteer opportunity with your organization.

If you’re interested in reading more about DAF’s, here are a few good places to start:

With their rapid expansion not showing any signs of slowing down, ignoring DAFs potential to positively impact your organization and your donor relationships is something you cannot afford to do.

———————–

David Gee is an experienced development professional with particular expertise in capital campaigns, major gifts and donor stewardship. David joined the HUB Philanthropic Solutions team after serving as The Chicago Bar Foundation’s Director of Development. Prior to that, he spent 18 years working as a professional actor in Chicago. Among his volunteer activities, David serves on Forefront’s Resource Development Committee, the Development Committee for All Chicago and as the Local School Council Chair at Beaubien Elementary School.

 

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