By Mary Quilici Aumack, CEO
A Donor Advised Fund (DAF) is a charitable giving vehicle administered by a public charity. When a donation is made to the fund, the donor receives appropriate tax considerations. Then, the donor(s) decide over time where they would like to direct those charitable dollars.
Over the past several years, DAFs have gone from being the darlings of philanthropy planning to the target of broad criticism such as:
- Warehousing funds
- Not responsible/responsive to local need
The community foundations that sponsor these funds have also been deeply criticized for failing to connect donors to local charities. The impression is that the community foundations are not motivated to encourage transformative grants because their main source of revenue is administrative fees, based on fund balances.
I take a contrary view. I think of DAFs as important, strategic philanthropic investments. Those families and individuals who establish DAFs are transformed from “charitable check writers” to GRANT MAKERS. As grant makers, they think carefully and strategically about potential grantees.
Private foundations are subject to a minimum 5% granted to charities every year. While there is no mandated minimum for donor advised funds, we have seen our fund holders grant at a much higher rate, in the 15-25% range.
I often draw a parallel between DAFs and family savings. With our family finances, there are near term, opportunistic and major needs-based spending decisions. The same is true with DAFs.
For example:
| Near Term | Special Opportunity | Great Need | |
| Family Finance | Mortgage, Utilities (Checking Account) |
Family Vacation (Savings Account) |
House Damage (Investments) |
| Donor Advised Fund | Monthly/Annual Gifts to Church, School, etc. | Capital Campaign at Alma Mater | Pandemic Response |
THIS is why responsible donors build up value in their donor advised funds when they are able: so that they have significant ability to respond to opportunities and needs. They also can do the important work of crafting a philanthropic strategy, adding context to their giving.
We at the Catholic Community Foundation have seen this first-hand with the pandemic. In the first half of 2020 we granted more from our Donor Advised Funds than in ALL of 2019. We matched donors with organizations providing front line services to those most in need. We managed a match that motivated others to increase the impact of their giving. I am in discussion with another family about a match for education.
The Catholic Community Foundation provides opportunities for donors to gather in affinity groups around shared areas of interest. We also can provide connections to experts and content around subjects of interest to our donors, such an impact in giving and impact investing. We provide an effective and efficient conduit, connecting generous people with effective works.
The number one measure of the success of a DAF sponsor organization is grant making. We are successful when donors are inspired to make meaningful grants to non-profit organizations across a broad spectrum of service areas such as healthcare, housing, education, faith-based organizations, the arts, and more.
While Donor Advised Funds have received a lot of bad press lately, we’ve witnessed how well they can work. With the right partner, DAF donors can be inspired and motivated to build up “charitable equity” in their fund and make high impact, meaningful grants.
Establishing a Donor Advised Fund achieves what can be a pressing need to make a large charitable contribution in the year of a significant wealth event. That first step, while important in tax planning, is JUST the first step. The fun begins with the second question: Where do I want to go with my grant making? How do I want to improve community? How do I choose the appropriate organizations? What is the most effective way to involve our children? How will I measure the impact of my giving?
THESE are the conversations that bring us joy, and to which we add value.
If you or a client may benefit from a discussion with us, please contact the Foundation.
Learn more about our donor advised funds at cfoscc.org/donor-advised-funds and all our other services at cfoscc.org or call 408.995.5219.