Which Clients Should Open Donor-Advised Funds

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Much has been written about the reasons why so many individuals, couples, and families have established donor-advised fund accounts (DAFs) in recent years. With close to 300,000 accounts, these have become by far the most popular charitable vehicle. Many clients are planning to open accounts before year-end, often because their financial advisors, CPAs, and attorneys have been discussing the tax advantages and other benefits with them.

While there is still time to establish DAF accounts this year, it is beneficial for advisors to reach out and talk with clients to determine whether establishing one would make sense. Even if it does not, having the charitable conversation now will have many short and long term benefits to the clients, advisors, and charities the clients support.

The types of clients who have established or who would be excellent candidates to create DAFs include:

  1. Clients who are approaching retirement (advantageous to make large donation while earning high income and can receive greater tax benefit, and then can make grants from DAF account now and in future)
  1. Clients who have pending liquidity event (sale of business/asset or inheriting wealth)
  1. Clients who have already retired or sold their business and now have time, assets, and interest to get involved with philanthropy