Donor-Advised Funds: The Source Fundraisers Can't Afford to Ignore

Coinciding with that, Fidelity has had several DAF donors who are approaching retirement discuss “prefunding” their giving for when they are retired, essentially adding to their DAFs now while they’re still working so they can disperse the same amount of money during their retirement that they do today. They’re setting aside greater sums of money now so they can be as philanthropic as they want to be in retirement, Danforth says.

And, Heisman says, DAFs are often set up as an alternative to private foundations, and that’s beneficial for fundraisers for a couple of reasons. For starters, private foundations are mandated to give 5 percent of their assets to charity, and typically grant about that much, according to Heisman. DAFs give around 17 percent — or more than triple the amount, percentagewise, than private foundations.

Plus, with many DAF providers lowering their minimums to open an account, more donors are able to utilize DAFs today.

Then there is the matter of illiquid assets — namely publicly traded and non-publicly traded securities and stocks. Both Heisman and Danforth note that if someone wanted to give 100 shares of stock to a nonprofit directly, the nonprofit would need to pay commissions and not get the full amount that the shares are worth. However, through a DAF, the DAF provider can liquidate the securities and grant the full monetary amount to the nonprofit.

In addition, it would be difficult for a donor to divide 100 shares of stock between, say, 10 organizations, particularly for smaller organizations ill-equipped to deal with appreciable assets. However, through a DAF, the provider can again liquidate and distribute those assets to the nonprofits much more quickly and easily, according to Heisman.

DAFs relieve a lot of the burdens for donors and fundraisers themselves, which is partly why they continue to grow in popularity. The financial experts of the DAF houses do a lot of the legal and financial legwork, and the accounts provide the freedom and flexibility for donors to grant those funds to the charities of their choosing when they care to do so.