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Webinar Recap: Donor Advised Funds – Research and the Big Picture with Jennifer Filla

Last updated:  October 13, 2020

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Guest Post from Jennifer Filla

Webinars are wonderful! While they help educate, inform, and get your “little gray cells” moving, often they also create at least as many questions as they answer!

In my presentation, I suggested that if the key traits about Donor Advised Funds (“DAFs”) had to compete for destination bumper sticker popularity there would be three of them: GIFT, OWN, and TAX. In fact, much of the discussion about the good and bad of philanthropy revolves around these three concepts and is certainly not limited to DAFs.

I decided to group the webinar’s unanswered questions into these three categories. If you’re looking for one-stop clicking on the sources I use to stay informed on the topic of DAFs, visit my firm’s Prospect Research curated resource collection.

GIFT: Donors that give to create a DAF can remain anonymous

• Is there a way to discover someone’s DAF if it doesn’t contain his or her name?
• Do you know if a foundation’s giving via their DAF differs from their foundation/approved giving priorities?
• If a donor gets a soft credit in our system (so we know it’s them giving to us from their DAF) does that mean we can publicly list their name in our report or do we need to ask?
• On the processing side, DAFs create more work to obtain information for soft crediting (especially when the DAFs site or password process isn’t working well)!

In my presentation, I gave examples of individuals who had created DAFs, but also a private foundation that had created a DAF. If a donor, individual or entity, does not want to disclose that a gift was made to create a DAF, or that a gift made from the DAF was directed by her/him, then you will not know. You will probably not know the giving priorities either, although sometimes this is included on the sponsoring organization’s website.

Some good news is that according to the Fidelity Charitable 2020 Giving Report, 88% of its donors included their name and address to gift recipient organizations. Does that mean you have been given permission to publicly recognize the gift?

I would refer you to these organizations for advice and guidance on managing this kind of data from your donors:

• AFP Ethics Standards and Guidelines
• AASP Best Practices in Donor Advised Funds
• CASE Reporting Standards and Management Guidelines for Educational Fundraising

OWN: To create a DAF, the donor makes an irrevocable gift to the sponsoring organization

• I’ve heard over the years that there are cases that just because you “advise” the organization as to where to give, they may not necessarily follow through and give to where you have asked them to. Is that true?

When you make a gift to a sponsoring organization, such as Fidelity Charitable or your community foundation, you are making a gift that you can’t take back. It means that you are no longer the owner of that money. According to an agreement with the sponsoring organization, which can be different for each sponsoring organization, you can advise where a gift should be made.

Because the original donor, now the advisor, no longer has ownership, it is entirely possible that if there is a conflict, the sponsoring organization could take action that was not in agreement with the donor advisor.

For example, Fidelity Charitable has stated publicly that if a donor advisor does not disburse funds within 3 or 4 years, Fidelity Charitable will act and give away the money without the donor advisor’s consultation.

TAX: The gift to create a DAF has immediate tax consequences

• Did you say there is an immediate tax benefit?
• Does the DAF balance grow in any way before it is disbursed? Or is it just a place to hold funds before donating?

There are a few tax implications or consequences when creating a DAF. In the U.S., the donor can claim a tax deduction for the full amount of the gift made to create the DAF, depending upon her/his individual situation. Most people consider this to be a benefit.

The other U.S. tax implication is that the cash or assets gifted can now appreciate in value exempt from taxes. For example, if I donate highly appreciated stock to create a DAF, I can avoid paying capital gains tax on the stock and any future gains will also be exempt from tax.

Depending upon your perspective, this could be a wonderful way to create more wealth available for giving to charitable organizations, or it could be a way for already wealthy individuals to grow more wealth that can provide them and their heirs with influence.

In Living Color: Going beyond the facts to provide development officers with insights

• Who at a DAF would one develop a relationship with to get on the good side of the donor to a DAF?
• Can you reach out to folks like Fidelity Charitable and put your nonprofit on their list of organizations?
• How easy or hard is it to influence financial managers to suggest that their clients give to our specific charity? What should the process be of engaging financial managers?
• Where and how do donors get connected with investment firms and opportunities to give to DAFs?

In my presentation, I suggest that there are a variety of motivations for creating DAFs, and in the case of the very wealthy, it is often one giving vehicle among many choices that they make. As we researchers gather the facts about a donor prospect, including the possibility of a DAF, we have an opportunity to help development officers take actions based on the information we discover.

For example, if we are stewarding an existing donor and discover there is or is likely to be a DAF, we have the opportunity to share with the development officer how that DAF likely fits into the full picture of the prospect and could lend itself, or not, to a larger gift from the wealth over which the prospect has influence.

Many organizations act proactively to establish relationships with their local community foundations and with financial advisors. Planned giving officers have been doing this for a long time! How to build such relationships is outside the scope of prospect research, but I’m delighted to pass along some great resources:

• Why Financial Planners Are A Nonprofit’s Best Friends | Abby Jarvis on Qgive
• National Association of Charitable Gift Planners | There are local chapters across the U.S.
• Perspectives—Collaborating with Advisors to Grow Blended Gifts | AFP magazine

If you missed the webinar, you can watch the recording here. 

About the Author: Jennifer Filla is CEO of the Prospect Research Institute and President of Aspire Research Group LLC. A resourceful fundraiser with an innovative focus on prospect research, Jennifer is a researcher, consultant, author, speaker, and trainer. Her mission is to perform research with distinction and to provide other fundraising professionals with the power to perform their work with excellence, lead with research, and make a difference! Connect with her on LinkedIn.