Donor Advised Funds: Can They Be Leveraged to Benefit Your Charity?
Donor advised funds (“DAFs”) continue to be popular with total charitable assets at over $80 billion at the end of 2016. Competition for charitable dollars continues to be an ongoing struggle for all nonprofits; the growth of DAFs provides unique challenges and opportunities for charities. The challenge is that with increased giving by donors to DAFs, there are simply less donor dollars available to be given directly to charities. The opportunities are that DAFs (especially larger, well-established DAFs) accept contributions of nonmarketable assets, including nonpublicly traded stock, real estate, bitcoin, etc. For many charities, receiving gifts of nonmarketable assets presents challenges, among which is having the resources to liquidate those assets to cash, since most charities would not want to carry these nonmarketable assets on their books.
Prospective donors may not be aware of this option, and a charity can provide a service to both a potential donor and themselves, by engaging in a conversation with their donors about this potential giving opportunity. For example, let’s say that a donor has shares of stock in a nonpublicly traded company that has appreciated in value. The donor could receive a substantial tax benefit by donating the shares. However, the donor wishing to give to a smaller charity may not consider making a gift of these shares because the charity does not have the infrastructure to process this gift. The charity can make the donor aware that many DAFs can accept the gift of stock. After making the gift of the shares the donor can request the DAF to make a cash gift to the charity.
Charities may be well served to speak with their donors about utilizing a DAF to facilitate a gift of nonmarketable assets.