As a fundraising professional, staying on top of the latest trends in giving can feel like a full-time job. One of the hottest topics in the philanthropic community today is the increased popularity of donor-advised funds. DAFs provide many benefits to both the donor and nonprofit.
For donors, they:
• Allow creation of a fund within a sponsor organization that has minimal costs
• Provide immediate tax deductions
• Create a flexible timeline for giving
For nonprofits, they:
• Lead to larger and more consistent donations
• Encourage philanthropy
These benefits are evident in their growth—DAFs accounted for nearly 4% of all charitable giving in the US in 2014, totaling almost $12.5 billion. In response to the many questions we’ve been fielding about DAFs, I led a private webinar with our current and past clients on April 20. Among the advice and insight I shared with them were these five ways fundraising professionals can prepare their nonprofits for this growth in DAFs:
1. Do internal and external research on DAFs. Talk to community foundations to find out if they have DAF clients who would be interested in your nonprofit’s work. In addition, you should search other nonprofits’ annual reports for names of people already connected to you for indicators that they have a DAF. It’s also wise to ask your board members if they have friends with DAFs who could be a good match.
2. Market DAFs as a giving tool. On your website and other materials that provide ways to give, you should mention that you accept donor-advised funds. It’s also a good idea to spotlight current DAF holders in your newsletter. But before promoting DAFs, make sure your information is up to date on sites like Guidestar. Details like your address, tax ID and legal name must be accurate.
3. Practice good stewardship with DAF holders. Have ongoing conversations with these individuals just as you (should!) do with other donors—they need to be kept up to date on your organization and its impact. Just as important, make sure your thank-you notes acknowledge the donor rather than the sponsoring organization. That means correctly filing the gift under the fund holder’s name during processing. Though if the sponsor is a community foundation, it’s also courteous to let them know you appreciate the gift.
4. Talk to DAF holders about planned giving. These donors are strategic about their giving; there’s a higher likelihood of their will having a charitable provision. Planned giving should be part of your ongoing conversations with these donors—they’ve demonstrated an intent to give, so engage them in the life of your organization and show them the impact you’re making.
5. Document their intent to give. It sounds like a mere description, but “intent to give” has a specific meaning that’s different from a pledge. Legally, DAF holders cannot sign a multiyear pledge for a dollar amount—but they can document intent to give over a multiyear period. Therefore, your records need to reflect this distinction. Be sure to speak with the sponsoring organization for the appropriate language to use in the intent to give, and then you can share it with the donor.
Following these recommendations will set you up for a donor necessity: making it easy to give! DAFs present a wealth of potential for nonprofits to tap into, so stay informed on the topic and be prepared to receive DAF gifts. It will increase donor confidence and serve as a stewardship tool, building your relationship with your donors and inspiring philanthropy.