When it comes to charitable giving in estate planning, there are a number of ways an individual can leave a lasting legacy. For example, specific charities can be named as direct beneficiaries, or a private foundation or supporting organization can be founded. There’s also the option of establishing a charitable trust. One of the most highly advantageous options is to name an organization as the successor to a donor advised fund (DAF).
For non-profits and charitable organizations, DAF accounts represent tremendous fundraising opportunity. In fact, according to NP Trust, there are more than 460,000 individual DAF accounts in the United States. Collectively, these accounts hold more than $140 billion, and these funds are growing at an incredible 16% YoY. So, there is certainly a lot of money to tap into.
In addition to streamlining their philanthropic efforts in a tax-wise way, DAF donors also have the opportunity to create a succession plan, effectively directing what is to happen to the account after they have passed on. Succession planning options ultimately depend on the specific policies of the DAF sponsor, however, the most common options typically include:
Appointing a loved one (or several loved ones) to assume responsibility for the DAF
Designating one or two charitable beneficiaries to receive the DAF assets
Endowing a DAF to issue grants to named charities for as long as possible
For sponsors that offer a DAF endowment structure, this can be an excellent opportunity to facilitate ongoing gifts from annual donors, even after they have passed on. Furthermore, DAFs also represent tremendous intergenerational opportunities, opening the door to connect with a whole new generation of donors. And because DAF funds are required to go to a charity, advisors don't have to worry about running into any family issues about heirs being cut out of the will, etc.
For non-profits and charitable organizations, the good news is, most DAF sponsors offer grant-making to charitable beneficiaries as a succession option. In fact, with some of the smaller DAF sponsors, this may actually be the only option. To increase your chances of being named as a charitable beneficiary of a DAF, consider targeting DAF donors as part of your planned giving marketing strategy.
DAF’s continue to be a growing resource for fundraisers. By targeting these types of account holders, your organization will have the opportunity to raise even more money, and in a much more sustainable way.