So You Have a Donor Advised Fund. Now what?

“I have never seen a U-Haul parked next to a hearse.”

You can’t take your material possessions with you to your grave, as the above quote reminds us. On the heels of the recent tax reform, there seemed to be a frenzy to make charitable donations before bidding farewell to 2017. People who already had a donor-advised fund (DAF) might have found giving their 2018 donations ahead of the New Year a bit easier because they didn’t have to think about which charity would be the recipient of their gift. It’s taking the next step that will prove more challenging.

Here’s how to use DAFs to help clients use their wealth in the most meaningful way.

Clients don’t establish DAFs exclusively for the tax benefits. But that advantage is often why an advisor recommends a DAF. The driving force behind charitable vehicles is the desire to give. DAFs are for people who already have a philanthropic edge.

Yet, in speaking with actual or would-be donors, I hear a recurring question: “How do I decide who gets my money?” I have heard different answers to this question, like “think about whom or what made a difference in your life” and “look at who is asking and find out why.”

That’s solid advice, but there is more to it than that. Much more.

DAFs are ideal for people who want to give but haven’t decided where to give. Choosing among almost 1.1 million public charities and 1.5 million tax-exempt organizations in the U.S. is a daunting task. The numbers prove it. There was $85.15 billion sitting in DAFs at the end of 2016. That is after $15.75 billion went to charities – a significant amount. Yet there are so many people in need, so many important and necessary causes that need support; the dollars left in DAFs could resolve pressing problems addressed by the non-profit sector – everything from poverty and emergency relief to supporting health and education programs.

Enriching the client experience

A positive client experience is key to our success. There are many ways to enhance our clients’ experience, from the scope of services we provide to how we deliver them. Yet, I have found that helping clients be intentional in everything related to finances, including their giving, goes far beyond the client-service experience to making a difference in the client-life experience. Even more so, helping clients identify the power giving can have in their life experience is one of the most significant things we can do for them. Figures 1 and 2 represent this in its most simple form.

Figure 1. Results-oriented planning and investment work