With the help of their financial, legal and tax advisors, thousands of clients have created Donor Advised Fund (DAF) accounts over the past 10 years. There are now more than 450,000 in the country. Most clients have planned to pass these accounts on to their children and heirs upon their deaths.
Consequently, it is always surprising to hear the reactions when my colleagues at American Endowment Foundation (AEF) notify someone that he or she has become the successor advisor on a DAF account established by their parents, relative or friend. Unfortunately, about 75 percent of these people had no idea that they would now be responsible for making grants to charities from an account that they did not even know existed.
Some of the questions we hear upon notification are:
1. What is a donor-advised fund?
2. How much did you say is in the account?
3. Can I just keep and spend that money myself?
4. My parents left that much money for charity and only left me _________?
5. What happens if I have no idea which charities to give money to?
What should be an uplifting conversation when we tell successor advisors that they are able to give money from an already-funded account to their favorite causes and charities, can become one that unnecessarily creates confusion and consternation.
When clients initially create a DAF account, they indicate whether at their deaths the assets in the account will be distributed to charities of their choice or whether their successor advisors will continue to make grants from the account. Some local or single-issue DAF sponsors do not allow accounts to continue to the next generation or in perpetuity, but most DAF sponsors do. Most sponsors also allow donors to alter the succession plan should circumstances or relationships change.