3 Things to Do Now to Maximize Year-End Donor-Advised Fund Giving

Donor-advised funds (DAFs) are charitable giving vehicles that allow donors or organizations to make a charitable contribution, receive an immediate tax benefit, and recommend grants from the fund to eligible nonprofit organizations over time.

The pandemic changed many things about the way consumers (and donors) conduct business — from grocery shopping and banking to events and charitable contributions. One of these changes include adding record amounts to their DAFs. In fact, in 2021, donors added $73 billion to their DAFs, which is an unprecedented 47% increase over the previous year.

Since grants are made over time and there is frequently a lag in distributions, much of those contributions are currently available. Nonprofit organizations wanting to capture these DAF gifts need to act swiftly to take advantage of the more than $243 billion available to go to charities. Tax season and end-of-year giving represent a key time for DAF donors; developing strategies now will ensure organizations are well positioned for year end.

1. Identify Known and Likely DAF Donors on the Current File

Since DAF funds may come in as a lump-sum check, review gift processing procedures and create controls for the way DAF gifts are documented in the system of record. The goal is to ensure any individual donor names provided are recorded as DAF donors and part of the gift. It’s not advisable to simply record the sum under the check issuer name if donor names are provided. 

Of course, some DAF donors prefer to remain anonymous. But not all do, so record what is provided and train employees to make gift recording a standard practice. 

To identify donors who have established a DAF, conduct research, including searching for individuals in public records, annual reports, tax filings and organizations, such as National Philanthropic Trust or the National Christian Foundation. These resources may provide information on the size and focus of each fund, as well as contact information for the donor or adviser. 

After identifying known DAF donors, build a model that you can apply to the rest of the donor file to identify those who have attributes similar to known DAF donors. 

Organizations also should consider some of the unique challenges DAF giving creates, so that strategies maximize the benefits of these funds while minimizing any negative impacts. For example, a switch from direct giving could result in reduced opportunities to build relationships with the donors. 

Additionally, organizations should recognize that funds from DAFs might not be received in a timely manner; fees could reduce the value of the gift amount; or DAF reporting requirements could require additional resources to comply. 

Once pitfalls have been considered and DAF segment audiences are identified, perform analysis to establish giving patterns, set benchmarks and define KPIs. DAF gifts typically see increases in distribution activity around tax season and year-end giving, so consider timing in your cadence of stewardship and direct asks. It’s also likely that some DAF donors will remain anonymous. So determine how success will be measured, understanding that data may be imperfect.

2. Tailor Outreach to Steward and Educate These Donors

Use outreach as an opportunity to learn about DAF donors’ specific needs and interests to inform future strategies and messaging that are personal and resonate with them.

Recognize and steward donors. Thank them specifically for giving via their DAF, and share the impact their gift will have on advancing the organization’s mission.

Educate potential DAF donors. In addition to market forces, DAFs are on the rise because they offer donors many compelling advantages, which you should be working into your outreach strategy and messaging. These might include:

• Tax benefits. DAFs provide an immediate tax deduction in the current year for contributions, even if gifts are made over time.
• Investment options. DAFs offer a range of investment options, so donors can choose a strategy that aligns with their values.
• Flexibility. Donors are able to recommend grants to the charity of their choice, at any time. They can also make contributions to multiple charities from a single account.
• Anonymity. Donors can easily make anonymous gifts through a DAF.
• Legacy planning. DAFs can also be used as a tool for estate and legacy planning, as they can be passed on to heirs as a way to continue a philanthropic legacy.

3. Test, Evaluate and Track Your Progress

Finally, structure a disciplined test cadence for this audience, and evaluate the effectiveness of messaging and images that are personalized and relevant. 

Determine the optimal mix of channels based on donor preferences, and track progress against the established metrics.

With more than $243 billion, DAF giving is an opportunity that nonprofit organizations should not miss out on. The time is now to devise your strategic plan. 

The preceding blog was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.