Giving Compass' Take:
- Here are five steps for funders to ensure their donor-advised funds put the most charitable dollars into communities and causes they care about.
- How can you use your DAF more effectively?
- Read more on how donor-advised funds can benefit nonprofits.
What is Giving Compass?
We connect donors to learning resources and ways to support community-led solutions. Learn more about us.
Over the past 30 years, donor-advised funds (DAFs) have become an increasingly popular choice for ultra-high-net-worth individuals and families. With low costs and minimal administrative headaches, DAFs are easy to set up, and donors receive their tax advantage right away, regardless of when they start recommending financial distributions to non-profit organizations. That's because DAFs, unlike charitable foundations, have no minimum distribution requirement.
However, this can sometimes lead to stagnation. Without the outside pressure of a deadline to spur giving, DAF balances often continue to grow without donors following through on their charitable intentions, keeping funds sidelined that could otherwise support charitable organizations. What's more, because money in a DAF can only be given to IRS-qualified charities, most DAFs don't have a built-in way for donors to use their funds to hire outside support or consultants. This can make it hard for donors to receive advice or strategic support that might help them get started.
Donors are passionate about doing good with their DAFs, but life's distractions can keep them from acting on their good intentions. Some hesitate or forget to recommend financial distributions at all, while others opt for the path of least resistance, giving reactively without putting much thought into the organizations they're donating to.
Whether you've had a DAF for a while or just set one up recently, here are five proven tactics to help DAF holders overcome the psychological barriers holding them back, put more charitable dollars into the field, and fulfill the expectations of their roles as philanthropists.
- Process and plan
- Think of giving as learning
- Narrow the landscape
- Define a giving persona
- Address interpersonal tensions
Read the full article about donor-advised funds at RBC Wealth Management.