Eileen Heisman: Hi! I am Eileen Heisman, President and CEO of National Philanthropic Trust. Today I am talking about how to start a Donor-Advised Fund.
Donor-Advised Funds make giving easy, but getting started should be done carefully. Finding the right sponsoring charity that can help you reach your philanthropic goals is the most important step in starting your Donor-Advised Fund.
Different sponsoring charities specialize in different aspects of giving. For example, some sponsoring charities, such as a church or university, may encourage or even require donors to give to certain initiatives. Some community foundations require donors to grant a percentage of the fund's income to local charities. Some limit the number of generations who can be advisors.
It is also important to consider whether a fund sponsor is a good match for your philanthropic interest. Not all sponsors will make grants to charities outside the United States. So if international giving is important to you, seek out a fund sponsor that allows you to make grants abroad.
There are a number of questions you should ask fund sponsors when starting your Donor-Advised Fund. Here are key questions you should ask.
What are the initial and minimum contribution requirements? What type of assets do you accept? What are the investment options? Are there any restrictions on grant making? What are your fees? And what are my options for appointing successors to my fund? Once you have selected the sponsoring charity for your Donor-Advised Fund, you should consider your initial gift. Certain assets may offer you better tax advantages. For example, contributing appreciated stock to your Donor-Advised Fund may lower or eliminate personal capital gains. You may also hold certain liquid assets that you have never considered donating. Real estate, artwork, and other collections can often be gifted to your Donor-Advised Fund. The charity will sell them and the proceeds are turned into mission-critical grants for your favorite charities.
Before you recommend a grant from a Donor-Advised Fund, there are a few administrative items to address. First, you will need to name it. People often name their Donor-Advised Fund after the family, a specific area of concern, or in memory of someone.
You will also want to name advisors who will assume advising responsibilities. Co-advisors are often spouses or children. They will have the same advising privileges as you. They will be able to recommend grants or change the investment strategy.
Some donors choose to give their advisors, such as a lawyer, accountant, or a financial advisor limited advising responsibilities.
Finally, you will want to determine what happens to the fund after your lifetime. You may wish to name successors who are often the same people as your advisors, or you might want to decide to name a charitable beneficiary to receive the balance of your fund or a percentage of it after your death.
Many fund sponsors allow you to choose an investment strategy for the assets in your Donor-Advised Fund. Choose the approved portfolio that matches your risk tolerance or consult your advisors about it.
Studies have shown that most philanthropists take less risk with their philanthropic investments than their personal wealth. This demonstrates that desire to give is very personal and very real. After you have gone through the basics of establishing your Donor-Advised Fund, you will be ready to recommend your first grant.