Smart Giving, Powerful Results: Donor Advised Funds and Estate Plans are a Dynamic Duo
Imagine a world where legacy isn’t just a will and an estate plan tucked away in a drawer, but a living, breathing force for good—guiding family values for generations, while supporting the charities that matter most to your clients.
That’s the superpower of a donor advised fund (DAF) – a tax-smart, simple, and flexible tool facilitating charitable donations – today and tomorrow.
Many people procrastinate until the last minute to consider year-end charitable donations. If this describes you or your clients – you are in good company, so don’t feel bad. But there is a better way that is both tax-smart and simple. It can also be an integral part of estate planning.
A DAF transforms philanthropy into a family tradition. If you’re new to DAFs, or need a quick refresh, explore the basics here:
Simple to Implement, Powerful in Impact
A Donor Advised Fund Can Simplify Charitable Donations, and Complement Charitable Estate Plans
Donating to charity doesn’t have to be an afterthought in estate planning—it’s an opportunity to align wealth with values. According to a Kiplinger’s article, combining DAFs, a lifetime charitable giving vehicle, with estate plans highlights the superpower of DAFs.
A DAF acts as a charitable savings account:
- Assets are contributed during lifetime – cash, marketable securities, or illiquid assets (such as real estate)
- Affording your clients an immediate tax deduction
- Clients then recommend grants on their own timetable, in the amounts selected, to the causes they want to support.
Some DAF and Estate Planning highlights:
Contribute flexibly:
Donating to a DAF using appreciated assets avoids capital gains. In addition, because DAF contributions are irrevocable, the donated assets are removed from the client’s estate and therefore, are not subject to estate tax.
Involve successors:
Name family members as advisors to continue the giving legacy, turning donations into a multi-generational conversation.
Streamline Will and Estate Planning:
Instead of listing dozens of charities in estate documents, direct a portion of the assets to a DAF for simplified, ongoing distributions.
This approach not only reduces administrative and practical headaches for heirs but also ensures the charitable vision endures.
Smart, Long-Term Impact: Giving with DAFs
The beauty of a DAF lies in its versatility for charitable donations. Your clients control the grant timing and grant recipients, making it ideal for both immediate needs and future planning. Consider these proven strategies:
Give Now to Discover How to Include Charities in Your Estate Plan:
Supporting favorite charities during lifetime through a DAF, allows clients to see their work in action – helping clients to decide whether to include them in their estate plan for charitable giving beyond their lifetime.
Bunching Donations for Efficiency:
Combine multiple years’ worth of gifts into one larger contribution to a DAF. This maximizes deductions without annual hassle—perfect for estate planners looking to consolidate charitable bequests.
Asset Diversification:
Donate non-cash items, such as closely held business interests, real estate, or cryptocurrency, to a DAF. Since valuation and liquidation are managed when funding the DAF, clients are then free in the future to focus fully on the joy of giving
Case Scenario: Scattered Donations turn into a Deliberate Rhythm of Giving:
- Client: James, a retiree, and widower
- Three adult children
- Existing estate plan
- New $50,000 DAF
James updated his estate plan. He funded a DAF with $50,000 in stock, naming his children as joint advisors. Now they donate to charity together, annually, honoring his love for animal welfare, and teaching the next generation about James’ passions and generosity. Upon his passing the DAF will be a 10% beneficiary of his estate.
Seamless Integration of a DAF into Wills and Trusts for Charitable Giving
Estate planning pros often call the DAF a “philanthropic Swiss Army knife.” To donate to charity through an estate, use DAFs as this multi-functional tool to assist in creating a comprehensive charitable estate plan.
Designate a DAF as a Beneficiary:
In wills or revocable trusts, name a DAF as a beneficiary for a percentage of the estate (e.g., 10% to go toward charitable grants). This ensures assets flow directly into the DAF.
Set Up Successor Advisors:
Appoint trusted family or advisors to manage post-death grants, with guidelines – such as “50% to environmental charities.” – leaving a giving roadmap.
Coordinate with Advisors:
Work with estate attorneys and CPAs to “pour over” IRA or retirement assets into a DAF, managing required minimum distributions while amplifying the charitable footprint.
Tip: Review your DAF sponsors’ minimum grant requirements (starting at $100 at iGiftFund) to match the estate’s scale. This keeps donations flowing smoothly, even in complex family dynamics.
DAFs Support Family Giving Beyond a Client’s Lifetime
DAFs shine in fostering family unity around philanthropy. By naming successors, a shared platform for donating to charity that sparks discussions and builds bonds is created.
Annual Family Grant Sessions:
Gather heirs for a “giving meeting” to review and recommend grants, turning estate assets into collaborative impact.
Thematic Focus Areas:
Predefine buckets, like education or health, so families learn to donate to aligned charitable organizations without debate.
Case Scenario:
- Client: Rose
- No children
- Four adult nieces
Rose’s family transformed their late matriarch’s DAF into a tradition. Each holiday, they donate to charity in Rose’s name, blending remembrance with purpose. Beyond just the money, stories and values are passed down.
Are you Ready?
Enhance your Practice and Your Clients’ Legacies by Working Collaboratively and Using Donor Advised Funds
Be the financial advisor who initiates the charitable giving conversation with clients, as opposed to the financial advisor who reacts to the topic of philanthropy brought up by the client.
Initiate the collaboration with your clients’ full advisory team (CPAs, attorneys, etc.) to ensure that charitable giving is aligned across estate, tax, and financial goals and strategies.
Tip: For advisors, DAFs enhance client relationships, reduce client attrition, and position you as a steward of both financial and familial legacies.
Embrace and initiate estate planning collaboration for your charitably inclined clients – It could be game-changing for your practice!
Obtain your free copy of The One Page Legacy Plan, a guide on using DAFs, by iGiftFund Founder and Chairman, Phil Tobin. This resource complements your advisory services in building family legacies.
Contact iGiftFund – Our experienced professionals are here to assist and provide insights on seamlessly integrating DAFs into your practice.
This information contained in this article is intended solely for educational purposes.
The content is not intended, and shall not be construed as professional advice (or a substitution for) including but not limited to legal, financial, tax or any other professional interpretation.