Positioning Your Organization for Transformational Gifts - Leveraging Donor-Advised Funds

We’re unpacking key ways you can best position your nonprofit for planned giving in this blog series, and we’ve outlined some of the key concerns that donors express about leaving a large bequest to a nonprofit (even one they care deeply about). The most common fear is that the organization can’t manage it.

One way to address this core issue is through donor-advised funds (DAFs). A nonprofit organization can establish a DAF at a community or religious foundation - it becomes a receiving fund for gifts where donors can allocate contributions, and it’s fiscally managed by the foundation. 

In the same way, individual donors/families can create a DAF and make gifts (referred to typically ‘grants’ by the foundations) to the organizations of their choosing. Some donors direct quarterly gifts out of their DAF account to nonprofit causes and other ministries. The community foundation managing the DAF has the responsibility for investing the funds and reporting on them to the donor. 

For donors who are concerned about leaving a significant gift to one organization, a donor-advised fund is a great option. Most donors see a tax benefit when making their gifts to the DAF. The managing foundation will take accountability for ensuring the funds are managed and distributed to the organizations or ministries. The foundation also regularly reviews the recipient organizations to be sure they still meet the intentions of the donor. So for example, if an outreach center changes its mission and radically departs from that of the donor’s original intent, the foundation can evaluate giving future grants to that organization from the donor’s DAF.

Many local community foundations and religious foundations will be happy to partner with you to provide donor materials, information on DAFs, or even speak to your members about structuring their estate plans. 

Organizations who make it a priority to educate their members and seek planned giving commitments will eventually find themselves in a situation where they can better fund and plan their work. Educate, communicate, strategize, and leverage the power of DAFs to change the trajectory of your long-term fiscal and missional future.

Tim Smith