Kristin Raack, Principal at AltruNext, was recently featured as a guest author about leveraging Donor Advised Funds (DAFs) for capital campaigns. The full article was originally published by Capital Campaign Pro on CapitalCampaignPro.com and reprinted here with their permission.
Donor Advised Funds (DAFs) have been a hot topic over the last few years — and for good reason. Data shows that they are the fastest growing philanthropic vehicle:
There are nearly 2 million DAF accounts.
Current DAF holdings are worth approximately $229 billion.
Giving from DAFs has increased 600% over 10 years.
In 2022 (the most recent year analyzed), DAFs paid out $52.2 billion in gifts or grants.
DAF actual payout rates (22.5%) are much higher than mandated payouts for private foundation rates (5%).
While Giving USA reported reduced charitable giving in 2023, DAF donors accelerated their giving during the same time period.
But, what exactly are DAFs, and do they have a place in capital campaigns?
Donor Advised Funds (DAFs) and Capital Campaigns
Donor Advised Funds are charitable investment accounts. Individuals can contribute cash, stocks, and/or other assets and receive an immediate tax deduction. The funds are then invested for tax-free growth.
An advisor manages the assets, and the donor recommends donations to charities of their choice.
Capital Campaigns Can Benefit from DAF Support
By setting up a donor advised fund, individuals are demonstrating their deep commitment to intentional philanthropy — making them ideal prospects for campaign gifts. If they have already given to your organization through their DAF, you have confirmation of their ability, belief, and contact. In addition to leveraging their DAF, they may be able to tap into other appreciated assets to make a more significant campaign gift.
2 Key Details When Accepting DAFs
When accepting DAF grants toward campaign goals, there are two important technicalities to keep in mind.
Donors receive tax benefits when they initially contribute to the DAF, not when they direct gifts from the DAF. This means that nonprofits should not send a tax receipt for any DAF grants they receive. However, DAF gifts can (and should!) still be acknowledged and recognized. A heartfelt thank you note (minus tax language) is never a bad response.
DAF grants cannot be used to pay a legally binding campaign pledge. That being said, donors can sign a letter of intent (as opposed to a “pledge form”) to make a multiyear gift through their DAF to support the campaign.
5 Steps to Prepare Your Organization for DAF Gifts
With a few easy steps, your organization will be positioned to maximize donations through Donor Advised Funds.
Search your donor database to identify supporters that have made DAF grants to your organization in the past. When meeting with them about a campaign gift, ask if they’d like to use their DAF.
Get in the habit of asking donors if they have a DAF. Some are still learning how to deploy those funds and will appreciate your knowledge. (Only 5-10% of DAF holders prefer to remain anonymous.)
Make sure your team knows the relevant rules about DAFs — especially regarding pledge payments and receipts. Set up clear procedures in your gift acceptance process.
Make it easy for your donors to give through DAFs. Highlight your ability to accept these grants on your website and in campaign collateral. You may even choose to add a DAF widget to your website to facilitate smooth transactions.
Build relationships with DAF administrators (when it’s relevant and appropriate). Many DAFs are administered through financial institutions (e.g., Fidelity, Schwab) and they will not be interested in developing relationships. Other DAFs are held at community foundations or single-issue charities (e.g., Nature Conservancy, Jewish Federation). These foundations and charities are committed to connecting their donors with causes that align with their interests. Many of these sponsors are willing to learn more about local nonprofits like yours.
Help Donors Maximize their Impact through their Preferred Giving Vehicles
Remember, all campaign gifts are the result of carefully identifying, cultivating, and soliciting donors.
In the end, it doesn’t matter much if individuals make a gift through a DAF, stocks, other appreciated assets, or write a check. But, by being aware of and responsive to your donors’ preferred giving vehicles, you’ll be able to help them have the impact they want to have through your campaign.
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