Donor-Advised Funds: How Your Nonprofit Can Gain Untapped Gifts
Donor-Advised Funds (DAFs) may seem out of reach, but reports show that they are growing at a rapid rate. Furthermore, DAFs have been making a significant impact on giving. For instance, a donor recently found out that his DAF had the ability to support early education impacting 80 children. The fund that went out to support this cause was in the ballpark of $170,000. This was possible through appreciated securities and growth of the fund in their portfolio.
If your nonprofit has not been leveraging Donor-Advised Funds to supplement your fundraising strategies, following our recommended best practices can help you get started. Make sure you get a copy of our best practices guide at the end of this article.
But first, let’s start with the basics.
What is a Donor-Advised Fund?
Amy Pirozzolo, Head of Marketing, Fidelity Charitable says, “A donor advised fund is like having a set-aside investment account just for your charitable giving.”
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DAFs are a way for donors to make a charitable contribution and get their tax deduction immediately. However, funds, securities, and assets are held by a public charity. The donor can then recommend grants to go out to charities from these assets.
Three Key Benefits of Using DAFs
- The nature of these funds allows donors to be more thoughtful about how they allocate resources to charities. It takes the time pressure off when they have had a financial windfall. They can establish the DAF right away and receive a tax deduction. But, they still have time to think about how best to use these funds.
In the words of a current DAF donor, these funds allow you to put 98% of the focus on giving and 2% on the implementation/technicalities of it.
- Assets can appreciate over time allowing charities to benefit from a higher value contribution.
- DAFs are also growing at an exponential rate when compared to the growth of overall giving. For example, giving overall grew 5% in 2017 vs DAFs that grew by 20% in the same period.
Profile of a Typical Donor
- The median age is 65. However, giving can begin as early as 55.
- 79% of them also volunteer their time with their money
- 68% have said that DAF is right for them because they have the money now but haven’t thought about how/where to give yet
- 76% give appreciated assets (privately held assets or publically traded stock)
- 76% give because it is an investment growth of charitable assets
- 27% give because they had a financial windfall
Before we get to our best practice recommendations, let’s understand some commonly held misconceptions about Donor-Advised Funds.
Donor-Advised Fund Myths- What is actually true?
|DAF donors are typically wealthy||The average DAF donor has a bank balance of $17,000|
|DAF contributions are always major gifts||Gifts have a wide range, but the average is about $4000|
|Money doesn’t move when it ends up in a Donor-Advised Fund||On average 37% of funds go to charities in year 1, 74% within 5 years and 88% within 10 years|
|DAFs are limited in number||Over 1000 charities have DAF programs|
5 Best Practices for Nonprofits to Get These Funds
Learn how best to fish in your own pond. Identify prospects for DAF giving from within your donor base.
Download our best practices guide here–>