Good news about donor advised funds
Understandably, nonprofits often worry that donor-advised funds may delay or diminish their donors’ contributions. In reality, though, donor advised funds can be very helpful to boost financial support for your mission. Three fundamental concepts are important to gaining a better understanding of how donor advised funds work at the community foundation.
Many options are available at the community foundation.
It’s important to note that a donor advised fund is just one of many types of funds that an individual, family, or business can establish with the community foundation. You’re likely more aware of donor advised funds than other types of funds because they are frequently covered in financial media and also because your organization might have received grants from specific donors through their donor advised funds. Dollars in donor advised funds are already set aside for charitable giving, and it’s very convenient for donors to use their funds to support favorite organizations–like yours.
The community foundation encourages donors to give directly.
Rest assured that the team at the community foundation encourages donors to give directly to their favorite charities when that’s the best strategy to achieve a donor’s estate planning, tax, and charitable goals. When that’s not a viable option, though, both the donor and the charity benefit from the donor using a donor advised or other type of fund at the community foundation. Examples include cases where the donor wants to give a complex asset, such as real estate or closely-held stock, or needs to plan out several years of giving to address fluctuating income levels and tax liability. Some donors also prefer to give anonymously, and a donor advised fund can help with that.
Donor advised funds are becoming increasingly popular.
Donor-advised funds are attractive vehicles to help donors organize their giving. In turn, donor advised fund sponsors—including community foundations—continue to channel billions of dollars in contributions annually to thousands of charities through these vehicles. When donors begin giving through a donor advised fund, their annual support for organizations often increases significantly, underscoring donor advised funds’ potential to deepen long-term donor engagement.
We’ll be providing an orientation to CFGV’s various fund types, including donor advised funds, and other partnership opportunities during our Lunch and Learn on November 12. In the meantime, the community foundation is always happy to provide an overview of how these vehicles work and why donors set them up in the first place. Please reach out anytime.
(This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.)
Simplified Summary
Donor advised funds (DAFs) are a way for people to set aside money for charity. The community foundation always encourages direct gifts, but DAFs can make giving easier—especially if someone wants to give over several years, donate complex things like property, or stay anonymous. These funds are becoming very popular, and many donors actually give more to nonprofits once they start using a DAF.
