Does your development strategy include pursuing grants from donor-advised funds (DAFs)? Considering the recent growth of these charitable investment vehicles, it should.

DAFs are managed financial accounts dedicated to charitable giving. Individual account owners establish and contribute to their own fund and then direct the account manager, also known as the sponsor, about which organizations should receive donations. Cash and other non-cash assets can be contributed to these funds, with the donor generally able to receive a tax deduction at the time of the contribution to the DAF.

Many DAFs are run by community foundations, charitable organizations that manage funds on behalf of individual owners. Community foundations create a locus of interest and identify key issues and priorities in the community. DAFs are central to how community foundations have functioned and grown.

The same best practices for building relationships with your individual donors apply to DAFs but with a few small modifications.

Here’s how to position your organization:

Analyze. Analyze your donor rolls to see if you are currently receiving donations from DAFs. These checks will come from a financial institution or from a community foundation rather than an individual donor.

While DAFs act as an intermediary between your organization and donor account owners, do your best to identify the account owners to establish a relationship, and thank them appropriately. If you can’t determine the owner, send a thank you note to the sponsor. The sponsor may relay your thanks and, if not, the sponsor will at least know that you appreciate your donors.

Nurture. Try to nurture relationships with DAF owners. The network of professionals who help individuals set up DAFs includes wealth, tax advisors, legal advisors and the donor services staff at community foundations.

When you meet with your non-DAF donors, find out their preferences for donations. Perhaps they have donated by check or cash but could donate from their DAF instead.

Think digital. Your fundraising and marketing materials should reference and encourage donors to give through their DAFs. This includes putting prompts and information on your website’s donation page including your legal name, Tax ID, address and the best person to contact.

The DAF sponsor may want to provide funding via Automated Clearing House (ACH) payments. Several DAF management companies support web widgets that allow donors to log into their DAFs and make grants directly from your page. Any way you can reduce the friction for accepting these donations will be helpful.

Cast a wider net. DAFs tend to cater to higher net worth individuals who employ professionals like wealth, tax and legal advisors to help establish and manage funds.

Because DAFs aren’t required to distribute funds regularly, consider setting up a visit to your local community foundation. There are databases of community foundations within your area that will list their primary efforts for the community.

The Community Foundations of Virginia provides a helpful map that lists all community foundations within VA. A few of the local DAFs include: Charlottesville Area Community Foundation, The Community Foundation of Harrisonburg-Rockingham and Community Foundation of the Central Blue Ridge, which serves the cities of Staunton and Waynesboro, as well as the counties of Augusta, Nelson and Highland Virginia.

The donor services staff at these foundations is charged with helping their donors meet their philanthropic aspirations and may find your organization of interest to one or more of their donor account owners.

Our team is familiar with DAFs. We would be happy to help you build a strategy to build these relationships. 

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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.




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