The 411 on Donor-Advised Funds
Occasionally — okay, I’ll admit that it is more than occasionally — I share my opinion about how non-profits think the art and science of fundraising is overly complicated. Often, non-profit professionals get bogged down with complex, unfamiliar words, and the fear of making mistakes. Don’t get me wrong — avoiding mistakes is important but don’t allow yourself to get intimidated and shy away from a learning opportunity that could majorly benefit your organization (and your career).
Let’s break down “Donor-Advised Funds” so that you can navigate your way through the fundraising process with clarity and ease.
Donor-Advised Funds are one of donors’ giving methods that tend to make people a bit nervous. While there are many complicated methods of planned giving that fundraisers should be cautious of, Donor-Advised Funds are not one of them!
Because of tax law changes that were implemented a few years ago causing most people to have a higher standard deduction, it became less advantageous to make a charitable contribution. Donors had to find alternative ways to support their favorite charities while also receiving the tax benefits of doing so. Donor-Advised Funds make this possible
Basically, Donor-Advised Funds are those that donors have contributed to non-profit organizations by establishing a fund specifically used for philanthropy. Donor-Advised Funds can be established for as little as $5,000 but have a big impact for both donors and the non-profit organizations that they support.
Don’t be intimidated by the “Donor Advised” portion of the term. This just means that the trustee of the fund (the donor) advised what should be done with those funds. The donor doesn’t lose influence over that money but it is no longer their money, as it now belongs to the Donor-Advised Fund.
How Donor-Advised Funds Benefit Donors & Organizations
Donor-Advised Funds offer a mutually-beneficial scenario for both donors and non-profit organizations. Donors who need (or want) a significant tax write off in one year will finance their Donor-Advised Funds, allowing them to write-off a large amount of money for a specific year. Donors can then specify which charities should receive the money from their fund(s), giving various organizations generous financial gifts from the Donor-Advised Fund.
It may sound unusual, but a significant number of individuals who establish a Donor-Advised Fund end up forgetting about them. Therefore, it’s important for you as a professional fundraiser to share in marketing materials that you accept gifts from Donor-Advised Funds.
Receiving Gifts from a Donor-Advised Fund
When you receive a gift from a Donor-Advised Fund, be sure to provide credit to the trustee/advisor — stewardship is key here — and send the tax letter to the Fund, not the trustee. The Donor-Advised Fund could contain a significant amount of resources, so don’t make a careless mistake that could cause the advisor to stop giving from their Fund!
Donors who give to your organization through a Donor-Advised Fund are smart and strategic philanthropists that you will want to keep close in your network.
About the Author
Michael J. Buckley, CFRE is a career fundraising professional and Founder and Managing Partner of The Killoe Group. His firm assists nonprofit organizations increase revenue, exposure and capacity through smart, data driven, successive decisions and effective planning. Mike’s experience and passion for the profession of fundraising have made him a sought-after speaker, consultant and presenter. The Killoe Group’s broad experiences include annual campaign audits and management, capital campaign leadership, feasibility studies, interim program leadership, board governance, strategic planning and capacity building.