Donor Advised Funds (DAFs) have quietly become one of the fastest-growing charitable giving vehicles in America. But what exactly is a DAF, and how can your church or nonprofit tap into this expanding pool of resources?
What is a Donor Advised Fund?
A Donor Advised Fund is like a charitable savings account. Donors contribute money, securities, or other assets to a DAF and receive an immediate tax deduction. The funds are then invested and grow tax-free over time. When donors are ready to give, they recommend grants to qualified nonprofits (churches qualify) from their fund balance.
The Growing Appeal of DAFs
DAF giving has exploded in recent years, with contributions reaching over $50 billion annually. This growth stems from several advantages: Immediate tax benefits, simplified record-keeping, the ability to give anonymously (if desired), and flexibility in timing donations. Many donors appreciate being able to contribute during high-income years while distributing grants over time as they identify worthy causes.
DAFs also appeal to busy donors who want to be strategic about their giving but lack time for extensive research. The fund structure allows them to contribute first and decide on recipients later. DAFs are particularly attractive for making a gift during a capital campaign.
Encouraging DAF Giving to Your Church/Nonprofit
To attract DAF donors, make the process seamless. Clearly indicate on your website, newsletters, and donation materials that you accept DAF grants.
Consider “target” messaging to DAF donors. Typically, you will not know who your DAF donors are, so your messaging needs to be “to those who have DAF accounts.” Highlight how their contributions can have lasting impact, since DAF assets often grow between contribution and distribution. Emphasize the convenience and tax advantages they’re already enjoying.
Consider partnering with financial advisors and wealth management firms who often introduce clients to DAFs. These professionals can be valuable allies in connecting you with potential major donors.
Finally, thank DAF donors like anyone else. When you receive a DAF gift, contact the sponsor (bank, wealth management group, etc.) and ask them for the name and contact information of the donor so you can acknowledge and thank them for their gift. If the sponsor indicates that the donor wishes to remain anonymous, ask them if they will forward a thank you to the donor that you will provide.
By understanding and embracing DAF giving, your church or nonprofit can access a significant and growing source of charitable support.
John V. Clark, President/Partner
The James Company
Phone: (815) 353-8997
Email: jclark@jamescompany.com
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