Charitable giving is appreciated at every level. Any time an individual gives, no matter the amount, it is a precious gift. Some donors may be in a position to give to a nonprofit they are passionate about. In this case, a donor advised fund (DAF) might be an effective way to maximize their gifts. Donor advised funds are charitable investment accounts established at a public charity to support charitable 501(c)(3) organizations and allow donors to take an immediate tax deduction when the cash or stocks are irrevocably contributed to a fund. The donor can decide what charities will benefit, either now or at a later date, when to disburse the funds and how much will be given to each charity.
As a 501(c)(3) nonprofit organization, you can accept donations from the public – that includes funds from a donor advised fund. We recommend marketing to your donors and other funders that they can contribute to your organization by allocating funds to be distributed from their donor advised funds that they have established. These donors are looking for organizations that meet their requirements for whom they would like to contribute.
What is a donor advised fund?
A donor advised fund is a charitable investment account. It is tax efficient, easy for the donor to maintain and offers the donor a number of benefits including:
- No capital gains tax on long-term appreciated assets that are gifted to a tax-qualified nonprofit
- Immediate tax deduction for the full market value of the gift, for most assets, to a tax qualified nonprofit (subject to the donor’s adjusted gross income) No excise taxes, unlike a private foundation
- Assets donated to a tax-qualified nonprofit are no longer part of the estate
- No minimum annual distribution requirement for DAF account holders (the donor)
How does a donor advised fund help my nonprofit?
When a donor contributes to your nonprofit through a DAF, there are three main benefits:
- When the donor sees how easy it is to send a grant to your nonprofit from the DAF, they are more likely to increase their gift
- Since giving is streamlined with a DAF, donors tend to become and stay more loyal to the nonprofit they’re donating to through their DAF
- Donors also tend to increase their volunteer hours with nonprofits they support through their DAF, thus providing your nonprofit with both funding and additional manpower
How can I educate my donors about donor advised funds?
If you have identified specific donors you think would be open to a conversation about donor advised funds, strategize the best way to educate them on DAFs. Introducing this concept at an already scheduled event is the easiest way to organically introduce the idea of a DAF.
Think about any galas, fundraisers, golf tournaments, etc. that your nonprofits already hosts. During those events, when is a good time to have a quick presentation? The donors attending your events are already passionate about your nonprofit and may be receptive to a new, easier and tax efficient way to support your mission.
We are here to help start the conversation.
To most effectively invest the funds within you DAF, it is important to work closely with a financial advisor. The professionals at Corrigan Krause can match you with a financial advisor to help get you started. Email firstname.lastname@example.org for more information.
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