Your Client Opened a Donor-Advised Fund Account. Now What?

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) to the account will be if it 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. Determine with the account advisor how much they should contribute to their donor-advised fund account every year and in the future.
13. Identify additional managed and unmanaged assets that they could donate to the DAF in the future, and whether illiquid assets like privately held stock, farmland, 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 another DAF sponsor 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. Understand the advantages to their grantees and themselves of making their grant recommendations at times other than year-end.

Should clients need additional 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. These independent firms do not provide financial, legal or tax advice, and often work with donors who are beginning their charitable journey, those who are not satisfied with their own efforts, or with those who need or want to change direction.