Donor-Advised Funds (DAFs) are an excellent tool for both financial planning and charitable giving. But not all DAFs are the same, and some are going to serve your purposes better than others.
Here are some important things to ask before opening a DAF:
- Is the sponsoring organization independent or is it affiliated with another organization? This can make a difference in the level of flexibility you may have in the uses of your fund. Always find out if there are any restrictions that may interfere with your goals.
- What assets are accepted? You may want to contribute non-cash assets such as securities, real estate, life insurance, or something else of value. Donating partial ownership in a closely held or family business may provide substantial tax beneifits.
- Will you have a choice of investments? Sometimes investments are pooled, and sometimes you’re allowed to have your money managed in a separate account. You should be able to bring in your financial advisor and discuss the pros and cons of pooling vs. a separate account management.
- Are there restrictions on who can receive your grants? Most DAFs come with some parameters as far as minimum annual distributions, and what type of entities may receive funds from your DAF. These important to know in advance as it will impact your giving strategy.
- Is there a flexible succession plan available? Most people who have DAFs will name a spouse as the successor to a DAF. But if you want another person or organization to succeed you, make sure that option is available before opening the fund.
- Can you access your DAF securely online? You should be able to access your account online anytime and see the status of your fund. Ideally, you should also be able to make contributions to your fund or submit grant recommendations online.
- What are the costs to administer a DAF? This is where you really need to read the fine print. The sponsoring organization should be compensated for administering your fund, but it’s important that those fees be straightforward, and make sense for your goals.
- Can you transfer your fund to another organization? If you think there’s a possibility that you’d ever want to move your fund to another administrator, make sure that’s allowed before opening your DAF.
Talk to your financial advisor about your DAF and how you plan to use it. Make sure you and your advisor fully understand how a DAF operates so that there are no surprises.
YouthBridge Community Foundation has low fees and great flexibility, so that donors can more easily reach their philanthropic goals. Contact YouthBridge to set up a consultation. Call 314-985-6778.