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.

Since so many want their accounts to continue, those who have created the DAF should discuss the account with the successor advisors in order to prepare them and allow for a positive experience later. Some of the many benefits to clients and advisors include:

1. Many families have been well-served by their advisors, and hope that their children will continue to work with them so these charitable assets can continue to grow and support the philanthropic efforts of the family. Including the advisors in these conversations can help increase the likelihood of this happening.

2. Successor advisors are more likely to continue to support some or all of the charities the DAF creators have funded.

3. It is an opportunity for clients to discuss with their children why charitable giving is important to them and why they support specific causes and charities.

4. This discussion can enable clients to pass down charitable values to their children and grandchildren, and if desired, they can even include them in giving decisions now so they can be prepared to continue to give later.

5. It can become a way for families to remain united after the deaths of their parents, as the children can continue to donate together to honor the memories of their parents.

6. Some families may continue to make some grants together after their parents’ deaths, but because children may live in different areas or have different beliefs, they respectfully may make separate grants or create separate DAF accounts from which they can each give. Planning ahead to discuss various options is helpful and can help minimize potential stress and unease.

7. When told in advance that a certain amount has been set aside for charitable giving instead of for taxes or as part of an inheritance, heirs are much more understanding. This is especially true when assets from IRAs are donated to DAF accounts at death, thereby eliminating significant taxes had these retirement assets been passed down to heirs.

Since the contact information for their successor advisors may change over time, donors should provide updates to their DAF sponsor whenever there is a change.   

At a recent roundtable featuring advisors from leading firms and non-profit organizations, there was a consensus that firms should not stop once a charitable vehicle has been established, as many clients need help getting started with their charitable planning but sometimes do not know where to turn for guidance.

For donors who are looking for help to develop a charitable mission or plan, engage their family, understand how to evaluate charities or how to give with impact, helpful content is offered by some DAF sponsors such as in AEF’s Library for Donors on its website. Should this content or conversations with their advisors prove to be insufficient, advisors may want to bring in philanthropic advisory firms to help their clients begin to achieve their philanthropic goals.

Having this conversation with successor advisors in advance will lead to many positive developments later when the account is transitioned to them. Instead of responding “What is a DAF?,” successor advisors will instead already be knowledgeable or at least know which questions to ask so the grantmaking can continue seamlessly.

Ken Nopar is the senior philanthropic advisor for the American Endowment Foundation, the country’s leading independent donor-advised fund.