Many charitable organizations receive gifts from Donor Advised Funds (DAFs) and other charitable giving entities. Many also fail to take advantage an opportunity to cultivate important donor relationships because they believe in one or more of the myths below.
The following is an excerpt (with our permission and thanks) of Ellen Israelson’s presentation at the Philanthropic Planning Group of Greater New York’s January program, “Working with Donor Advised Funds.” Ms. Israelson is the VP of Philanthropic Services & CMO at the Jewish Communal Fund.
Myths about Donor Advised Funds
: An effective fundraising strategy solicits donors based on their tax vehicle,
such as Private Foundations, Trusts and donor advised funds (DAFs).
You wouldn’t pitch a trust company because they manage assets earmarked for philanthropy, so why would you approach a donor advised fund sponsoring organization? They are the administrator and “back office,” not the philanthropic advisor. There is not an RFP process, and DAFs do not accept proposals.
Reach out to the individual, not the vehicle.
Myth #2: We don’t know how to contact the DAFs advisors
Most DAFs send the grant with a transmittal letter that provides the name and address of the person making the donation. Anonymous grants make up a very small percentage of DAF grants nationwide.
Make sure to capture all of the donor information that the DAF provides.
Myth #3: Fund holders give up significant control
as to where grants are directed; the DAF sponsor promotes the charitable organizations that they favor.
DAF sponsors rarely place restrictions on grant making other than ensuring compliance with the laws governing donor advised funds. In some cases, as with DAFs administered through a university, hospital or community foundation, limitations may be placed on the donors’ grant making. These are policy decisions and not legal restrictions.
Know that DAFs may only issue grants for charitable purposes to organizations qualified under Section 501(c)(3) of the Internal Revenue Code, exclusively. Grants cannot made to individuals. In addition, the donor may not receive goods and/or services in exchange, so tickets to a charity dinner, golf outing and auction are not permissible. Consider asking instead for annual support. Donors are giving because they want to support your organization.
Myth #4: DAF fund holders cannot sign gift agreements
DAFs by law cannot be used to fulfill binding personal pledges. However, the donor may sign a non-binding
agreement with the charity expressing their intention to recommend a grant or grants of a specific amount over a set time period from their donor advised fund. The charity may not book this gift, and it is not enforceable. It is a formal expression of the donors desire to provide ongoing support at a particular giving level.
Arrange a call or a meeting with both the donor and the DAF sponsor before formalizing any gift agreement. The DAF sponsor will work with you to create an agreement that works for the charity, protects the donor, and meets the legal requirements.
Myth #5: DAFS cannot continue a charitable legacy
because the sponsor, not the donor’s heirs or favorite charity, takes the residual assets in the fund.
This varies greatly. Many DAF sponsors allow at least one, or in some cases, is an unlimited succession. All DAFs permit successors to be charities or individuals, or a combination of both. DAFs that are embedded in a charitable institution, federation, or community foundation may institute policies that limit succession.
Research the policies of the DAF used by your donor, and reach out to the staff to get clear information on how to execute a deferred gift to your charity. Many DAFs have information and designation forms on their websites.