Your New Best Friend, the Donor Advised Fund

It’s not that donor advised funds have just come on the scene. They’ve been around since the early 1930’s when the New York Community Trust first started offering them to donors. They multiplied exponentially over time and the Fidelity Gift Fund is now the largest nonprofit in the United States.

Within the next few years, as much as 10% of all charitable giving will come from a donor advised fund (DAF).

But many in the nonprofit sector have an ambivalent relationship with this giving vehicle, particularly with donor advised funds that come out of the financial services sector, like Fidelity Gift Fund and Schwab Charitable (also now one of the top 5 biggest nonprofits in the US).

Community Foundations struggle to compete with the lower fees of their commercial peers and are falling behind in the competition for DAF donors.

Nonprofit organizations would rather the donor give money directly so that they can have more of a relationship with the donor.

But, Donor Advised Funds are not only here to stay, they are growing more than any other charitable vehicle, posting recent growth rates of 20% per year.

This year, 2017, could see a big bump in donor advised fund activity. People who are facing uncertainty around the looming proposal for changing the tax code might opt to park assets in donor advised funds while claiming what might be the last gasp of the charitable deduction. (See our recent blog post about recent threats to the survival of the charitable deduction here)

Now is the time to get on the DAF bandwagon!

Run through these questions and see if your organization is Donor-Advised-Fund friendly.

__ Do you provide information on donor advised funds for your donors?

Give your donors the full picture of how they can give to your organization and include donor advised funds. There are financial benefits to the donor, but there are other advantages, too. Donor advised funds can be used as a family gift vehicle or to collect gifts in memory or in honor of a loved one. The donor will appreciate your focus on what might work for them.

__ Do you have instructions for DAF donors that are interested in making distributions to your organization?

Donors don’t need much to make a donor advised fund distribution. They should have your organization’s tax identification number, the address, and the full name of your organization.

Consider creating a place on your website where people can easily go to get this information. On this page, ask donors to let you know about their distributions. This gets a conversation going and it also will help in matching donors to donor advised funds in the acknowledgement process.

On your written materials, provide a tick box on your reply devices that say, “I intend to recommend this amount from my donor-advised fund”.

__ Does your acknowledgement system recognize the individual donor behind the donor advised fund?

While it might seem natural for your organization to send a tax receipt for donor advised fund gifts, it isn’t necessary. The donor advised fund has already issued a tax receipt to the original individual donor and the donor advised fund itself (whether it be Fidelity or your local community foundation) will often ask charities not to send a thank you note or tax receipt.

However, for donor stewardship purposes, you should acknowledge the donor behind the donor advised fund gift if you have the name and contact information. (Fidelity reports that 91% of their donors disclose contact information to be acknowledged.)

The acknowledgement letter should have slightly different language. Instead of saying “thank you for your donation,” consider saying “thank you for recommending that <donor-advised fund> make a distribution from your donor-advised fund to <organization name>.” This slight change will show donors that you are paying attention to their unique way of giving.

__ Does your donor database recognize connections between gift funds and individual donors?

While the gift may come from a donor advised fund, you still want to build your relationship with the individual donor. So be sure to communicate with them as an individual, not as a fund of any kind. The donor will appreciate that you recognize the difference.

Make sure your database links the donor and the donor advised fund in some way and that you aren’t sending your stewardship and solicitation letters to a large entity that could care less!

__ Does your organization offer DAF donors communications choices?

When you do acknowledge your donor advised fund donors, be sure to ask them how they would like to receive communication from your organization. Might they want a personal phone update? A year-end proposal? Event invites? Honor their decisions to give this way and see what will help them to make their giving plans.

Don’t get left in the DAF dust! Be proactive in cultivating and stewarding your donor advised fund donors into a closer relationship!

 

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Category: Major Gifts, Planned Giving
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About Leslie Allen
For 15 years I worked for Greenpeace – one of the most powerful brands in the world – and I’ve taken the years of learning at large organizations and translated it to work for mid-sized and smaller grassroots organizations here all over the world. Learn More About Leslie...