Donor Advised Funds

75 Pages·2015·10.36 MB·English

by  Degenhart, Michael

Donor Advised Funds: Conceptual Overview
I. OVERVIEW OF IDEA
Donor Advised Funds (DAFs) are one of the most widely talked about gift
instruments today, and increasing numbers of donors are utilizing these
instruments due to their flexibility, low cost and grant-making efficiency.
While DAFs originally were offered predominately by community
foundations, in recent years their popularity has soared as a growing
number of financial services firms have established DAF programs,
increasing their visibility and drawing significant numbers of donors. One
of these funds, the Fidelity Charitable Gift Fund, is now one of the largest
charities in the country. Due to the growing popularity of this gift option,
heightened competition from these types of commercial programs for
donor relationships, and the need to expand development efforts among
younger alumni and friends, many colleges and universities have created or
enhanced their donor advised fund offerings. See Appendix 1 for a Sample
List of Schools that have created DAF programs.
II. WHY DONORS LIKE DAFS
DAFs provide many of the benefits of a private foundation, without the
same legal and record keeping requirements. Donors receive an immediate
income tax deduction for contributions to the DAF, yet can defer decisions
on the ultimate charitable recipients. Assets can be disbursed within
months after they are contributed or they can be distributed over a
lifetime. Also, contributions to DAFs are not subject to the lower deduction
limits applicable to gifts to private foundations. As with private
foundations, DAFs provide the opportunity for donors to include family
members as “advisors” to the funds, thus involving another generation in
philanthropy. Finally, there have been significant advances recently to the
online environments and capabilities available for organizations that
choose to offer these programs, improving engagement with donors and
their overall development efforts.
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III. THE BASIC STRUCTURE OF DONOR ADVISED FUNDS
Every DAF contains the same three basic components or functions – this is
true of Fidelity, Ball State, Wheaton, or the Chicago Community Trust:
1. A 501(c)(3) public charity acting as the host or sponsor, that receives and
holds the contributions
2. A set of investment options for donors’ contributed assets, until
grants/distributions are requested
3. A technology and administration capability providing donors and staff
access to current information and accounting services
IV. DIFFERENTIATING A UNIVERSITY/COLLEGE DAF PROGRAM – PROGRAM VISION:
One of the most important considerations is how a University/College DAF
program would provide an edge over other programs. Why would a donor
choose to establish a DAF with their alma mater rather than with a
community foundation or one of the commercially sponsored programs?
As noted in the introduction, donor advised funds have remained one of
the fastest growing charitable instruments in the country over the last
decade and a University/College’s major donors have a wide variety of
options available to them in the philanthropic marketplace. Commercial
investment companies such as Fidelity, Schwab, Calvert, Vanguard, and
Franklin Templeton, as well as virtually every major community foundation
in the country are vying for donor relationships and their assets.
The ability of a University/College to offer a competitive DAF platform is
critical to their long term development and donor retention efforts. Based
on research and discussions the features and benefits that we see as critical
to expanding relationships with our alumni and friends are:
 The ability to enhance University/College development efforts
among both mature donors as well as younger alumni.
 An ability to provide vibrant individualized content to alumni.
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V. REASONS WHY A UNIVERSITY/COLLEGE SHOULD OR SHOULD NOT ESTABLISH A DAF
PROGRAM
Potential arguments supporting the adoption of a University/College DAF:
 Retain strong ties with its most important donors, and may prevent
these donors from turning to another institution to establish this
type of donor centered arrangement;
 Regularly communicate with important donors;
 Provide a more effective investment and gift distribution model for
donors who currently have “pending funds”;
 Gain investment and distribution nexus with DAF assets that might
otherwise be managed by another organization;
 Expand the University/College’s development efforts within the
universe of younger donors and alumni before they form
relationships with other organizations;
 Enable University/College to capture assets from private or family
foundation assets being converted to DAF programs, a significant
trend among many donors.
Potential arguments opposing the adoption of a University/College DAF:
 The University/College might create the perception that they are in
competition with other charities (typically community foundations).
 A DAF program would siphon off money that would otherwise be
given outright to the University/College.
 It would be an inefficient use of development staff time, since the
University/College may only receive a portion of the distributions
from these funds.
 A DAF would create an administrative burden for University/College
staff because given the responsibility to review and authorize donors’
distribution requests.
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 The University/College DAF might put them in an awkward position
with donors who want part of the funds distributed to an
organization whose purpose is in conflict with their mission.
Appendix 1
A Sampling of Colleges and Universities Offering a Donor Advised Fund (DAF)
University of Florida
Stanford University
University of Rochester
University of Nebraska
University of Alabama
University of Oregon
Cornell University
Kansas State University
University of California – Chico
University of Delaware
University of Texas Health Science Center
Yale University
University of Pennsylvania
Washington State University
University of California – Berkeley
Ball State University
Wheaton College
Penn State University
Harvard University
University of Virginia
University of Maryland
University of Colorado
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Wheaton College
DAF Materials
senil dehsad yarG no sdloF
Donor Advised Fund
Folds on Gray dashed lines
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Why did Wheaton College establish
its Donor Advised Fund?
Wheaton College created its Donor Advised
Fund to partner with donors who share the
College’s vision and mission. The Fund provides
opportunities to support Wheaton, as well as other
charitable organizations, with a single, convenient
contribution. It also allows donors to create a
charitable “endowment” which provides continued
support to these charities in an efficient, cost
effective manner.
Thank you for considering the Wheaton College
Donor Advised Fund. We are here to help you
achieve your charitable gift planning goals.
The following questions and answers explain
the advantages and operations of the Donor
Advised Fund.
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What are the advantages of giving to Wheaton’s Donor Advised Fund?
• Charity Recommendation - In addition to
supporting the ministries of Wheaton Col-
lege, the Donor Advised Fund allows you to
recommend other charities to receive gifts
from the Fund.
• A Charitable Legacy - Through the Donor
Advised Fund, you can create a charitable
endowment, which will annually support
qualified charities during your life and after
your death. Your ability to recommend dis-
tributions to qualified charities can be passed
on to family members so that they too can
share in the joy and excitement of charitable
giving.
The Donor Advised Fund can benefit both you and
Wheaton College. Below are important advantag-
• Advantages over Commercial Donor
es that may be of value to you in your charitable
Advised Funds and Private Foundations
planning:
Wheaton seeks to develop long-lasting
• Partnership with Wheaton - The Donor relationships with its Donor Advised Fund
Advised Fund allows you to share in Whea- donors. This relational approach is a refresh-
ton’s ministry of shaping students into whole ing alternative to the computerized, internet,
and effective servants of Christ. telephone-tree driven world of commercial
donor advised funds. Also, its efficiency and
• One Stop Giving - The Donor Advised simplicity make the Donor Advised Fund
Fund provides a convenient, cost effective an attractive alternative to the expense and
opportunity for charitable giving, particu- complexity of a private foundation.
larly the gifting of appreciated assets, which
would otherwise be difficult or inconvenient • Financial Strength - Endowed gifts are
to split between your favorite charities. Give invested by the Donor Advised Fund through
now; recommend charities later. And you the Wheaton College Trust Company in
receive just one concise receipt for income the same well-managed investment pools as
tax purposes. Wheaton’s own endowment. Wheaton has
demonstrated a strong financial track record
and consistent investment performance for
over 100 years.
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How Does the Donor Advised Fund Work?
• An account is established in your name
when a gift is made to the Fund.
recommendations
• The assets given (cash, appreciated
stock, or real estate) are held by the
assests
Fund and are managed and invested
Wheaton College Wheaton College
by the College.
Donor Advised Fund
• You can recommend that gifts be
made from the Fund to Wheaton Other Charitable
Organizations
College and to other charitable tax deductions
organizations (as long as the mission
or values of the selected charities are not
inconsistent with those of the College).
• Your recommendations are reviewed by the
Fund’s Selection Committee. When recom-
mendations are approved, the gifts are made
directly from your account within the Donor
Advised Fund to the selected charities.
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