Becoming savvier about donor advised funds is a current trend in nonprofit fundraising. As a nonprofit, finding out which donors have a donor-advised fund (DAF) can be challenging since DAF accounts are privately held and not public entities, and because they are managed by sponsoring organizations or financial institutions.
What is a donor-advised fund?
A donor-advised fund, or DAF, is an account where a donor can deposit assets for donation to charity over time. The donor gets a tax deduction for making contributions to the donor-advised fund. A sponsoring organization like The Jewish Communal Fund, Vanguard, Schwab, or Fidelity manages the account; the donor recommends how to invest the assets and where to donate them. Technically, once assets are deposited into a donor-advised fund, the sponsoring organization has legal control over them. But as long as the donor chooses a charity that’s recognized by the IRS as a U.S. charitable organization, the sponsoring organization will usually use your charities of choice.
Here are a few strategies you can use to identify potential donor-advised fund donors:
1. Donor surveys and communication
Consider conducting donor surveys or outreach campaigns to your existing donor base. At least one survey annually is a best practice, but I prefer attaching surveys to each of my donor thank you letters. Ask donors if they have a DAF or if they utilize any specific financial institutions for their charitable giving. This information will help you identify donors who might have DAFs. Be sure to record what you find directly into the donor’s record in your donor database.
2. Host charitable giving briefings
Either before or after the workday, invite a prominent financial advisor to speak and share tips on charitable giving and tax efficiency. The speaker should cover how donor-advised funds can provide more immediate income tax deductions for donors, as well as potentially reduce capital gains taxes and estate taxes. Promote the gathering as an “invitation only” event. Broadcast the event online either as a video or phone conference as well as in person. It’s highly likely that many of the attendees either already has a DAF or is considering establishing one.
3. Publicly available information
Donor Advised Fund holders can search for charities to support by tax ID number or by name. Make sure your tax ID number is visible on your website so those donors can use it to recommend a grant to you. It also helps to make sure the name you do business as matches the name you have registered with the IRS so it’s easy for donors to find you when searching by name.
4. Research and data mining
Conduct prospect research on individual donors to gather information about their giving patterns and affiliations. Because private donor held DAFs are usually not made public, you must look for indicators such as previous grants made to your organization or publicly available information on their philanthropic activities. This research may provide insights into whether they have a DAF. A word of advice, not all prospect researchers know how to profile which donors are likely to have a DAF so be sure to ask about their abilities before hiring one.
5. Partnering with DAF sponsors
Collaborate with DAF sponsoring organizations or financial institutions by establishing relationships and open lines of communication. By fostering partnerships with these entities, you will make them aware of your important work, and they in turn may share that information with their account holders. Perhaps they will invite you as a guest speaker to one of their events where DAF holders are present?
6. Network and referrals
Leverage your existing relationships with donors, board members, and volunteers to inquire about potential DAF donors. They may have knowledge of individuals who are actively utilizing DAFs for their charitable giving.
Remember that DAF donors have the discretion to remain anonymous, and not all DAF donors may choose to disclose this information. Respect their privacy and focus on building relationships with donors based on their interests and philanthropic goals, regardless of whether they have a DAF.
What’s your experience with identifying donor-advised fund donors? Please let us know below.