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Encourage Clients to Open DAF Accounts Before It’s Too Late

Twelve questions to stimulate interest.

Though advisors have opened numerous donor-advised fund (DAF) accounts for clients in the past 10 years, some of these same advisors are frustrated that others haven’t yet opened accounts even though these would be in their best interests.

Last week, an advisor asked me for advice so he could convince some of his charitably-minded clients to open DAFs because they have been reluctant in the past. Most advisors, as well as some of their clients, understand the benefits of DAFs: maximum tax deduction now and ability to grant over time; ease of making grants online; anonymity when desired; ability to accept illiquid assets; low fees; assets grow tax-free; only one annual tax receipt.

While some clients open DAFs the first time they learn about them, often others don’t open them until their advisors recommend them a second or third time. At this point, most high-net-worth donors have friends, family members or colleagues who have opened accounts. Though it’s getting very late in the year and cutoffs for opening accounts and donating stock and other assets are looming, advisors should be encouraged that there’s still time to try again.

Twelve Questions

Here are some questions that have been helpful for advisors to ask clients in an effort to stimulate their interest and encourage them to do what they should have done years ago:

  1. Do you currently make donations to charities and expect to maintain or increase these over time?
  2. Do you want to minimize taxes, especially when selling highly appreciated assets?
  3. Do you anticipate a large bonus or income this year and want to set aside some assets to fund future giving?
  4. Do you want or need a large tax deduction now but need time to decide which charities to support?
  5. Do you often rush to send donations at the end of the year?
  6. Does your income fluctuate, making it difficult to donate consistent amounts annually to your favorite charities?
  7. Do you anticipate a liquidity event such as selling a business or real estate or receiving an inheritance in the not-too-distant future?
  8. Do you want a simple way of sending donations to many charities from an online portal instead of sending stock or checks or making credit card donations?
  9. Would you prefer to receive only one annual donation acknowledgement letter instead of having to keep track of numerous ones from the charities you support?
  10. Would you like to encourage and involve your heirs in charitable giving decisions and planning?
  11. Do you want the ability to give anonymously at times?
  12. Do you have a private foundation that’s cumbersome, costly and complicated to operate and want a more efficient and less expensive option that accomplishes the same charitable goals?

Peak Season

Some clients may not be ready to open a DAF or change what they’ve been doing for years, but now’s a perfect time to ask these questions because this is the peak charitable giving season and everyone receives numerous donation requests at this time of year. Most clients continue to be philanthropic and would be pleased to know of ways that they can have a greater impact on the causes and charities that are most important to them.

Should they not be ready to open a DAF this year, charities still need and would appreciate their direct support before year-end. By broaching the subject now, clients will be more likely to open a DAF earlier next year and avoid the same situation at the end of next year.                       

Ken Nopar is the vice president and senior philanthropic advisor for the American Endowment Foundation (AEF) donor-advised fund.

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