Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Financial Planning > Charitable Giving > Donor Advised Funds

Should Clients Donate Now or Later?

Your article was successfully shared with the contacts you provided.

More than ever before, recent events have caused clients, advisors, nonprofit professionals and the media to contemplate when donors should provide support to charities in need. During this century, and especially since the last recession, the trend has been for donors to give primarily during their lifetimes, though most still want their charitable vehicles to continue after their deaths.

During challenging times and when there is great need in many areas of society, there are various movements or initiatives to force or encourage donors to give more now. Most high-net-worth donors do not need this additional prodding and on their own maintain or even increase their donations.

When there are emergencies or natural disasters, many donors provide support to additional organizations and causes on top of their regular donations to their favorite charities.

But some who may not be aware of the reasons why donors want to give over time are perplexed that those who have the ability to give do not donate a substantial percentage of their charitable assets in the short term, especially when there are such urgent matters to address now.

Unfortunately, there will always be need, and many donors struggle with when to give in order to have the most short- and long-term impact. In order to help advisors help their clients, we are pleased to share some of the perspectives that American Endowment Foundation donors and their advisors have shared with us.

Some of the reasons why donors want to give now include:

  1. They want to address an immediate need
  2. They want to tackle a problem before it becomes even greater
  3. They want to receive gratification and appreciation while they are healthy and living
  4. They have developed a relationship with the charity, staff, other donors and program beneficiaries
  5. They have access to personal and corporate funds to provide additional support
  6. They have a friend, relative or colleague who is or will be affected by an issue, whether it’s health or mental illness, homelessness, food security or the environment
  7. They are a board member or active volunteer and are expected to make significant annual donations
  8. They have been asked to contribute by a friend, relative, colleague or representative from a charity
  9. Their wealth, tax or legal advisor has recommended that they make a donation now rather than later
  10. They are selling a business or other asset or received an inheritance and want to give now when they can have an impact now while minimizing taxes.

Many donors, especially those with a donor-advised fund (DAF) or private foundation, give now but also want to give over time as well because:

  1. The issue they are supporting will always be there and they want to ensure that there is money that can support the issue in the future
  2. They want to monitor the charity and be sure that the money they donate will be effectively used, and that the organization will survive in the long term
  3. They are concerned that the leadership or mission of an organization may change over time
  4. They don’t want to overwhelm a charity with one large donation and want to provide consistent support instead in the future
  5. They want to invest the money and increase the amount that they can give away in the future, and trust their advisors to grow the amount
  6. They have obligations to give in the future, especially if they are part of a board of directors
  7. They can use their annual donations as challenge grants to encourage other donors to give
  8. They want to give as a family, create family unity, and instill philanthropic values that will last for many years
  9. They are busy running their business and want to engage more deeply as a board member, donor or volunteer in retirement or after selling their business
  10. They are not knowledgeable enough and want to have full confidence and trust in the nonprofit organizations before making significant gifts.

There is no one correct answer for every situation. Most clients want to have an impact both now and later, and consequently want to provide support presently but also plan to continue to give over time. Each year may be different depending upon various laws, the economy, and clients’ income levels as well as their advisors’ recommendations.

Some critics want to force donors with DAFs to give 10% or 20% of the DAF account assets to charities, yet they are unaware that many DAF donors give at least that amount and that they also donate assets from other personal accounts or make qualified charitable distributions from their IRAs directly to charity.

Advisors can be very helpful in helping their clients think through the timetable for giving, investing the charitable assets appropriately so they have enough assets to give during good times and bad, and during the short term as well as in the future.

Though the overall percentage of clients’ assets that they may give away may not be significant when compared with their overall assets, these charitable assets can be among the clients’ most important since they can have a large impact upon society and the charities that are very important to them.

Ken Nopar is the vice president and senior philanthropic advisor for the American Endowment Foundation donor-advised fund. Founded in 1993, AEF is the sixth largest and the leading independent DAF sponsor, working with over 9000 donors and their tax, wealth, and legal advisors in all 50 states. 


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.