Gifts From Donor-Advised Funds What Fund Development Professionals Need to Know Clyde Kunz, presenter

Largest Charity in the USA? Fidelity Investments Charitable Gift Fund Became nation’s top charity (by contributions received) in 2016 Now the 2nd-largest grantmaker in the U.S. (behind Bill & Melinda Gates Foundation) Currently holds $15.34 B in assets Made $12.5M in investment management fees from its Donor-Advised Funds Clyde Kunz & Associates LLC

Donor-Advised Fund (DAF) First created in the 1930s, although Congress did not establish a legal structure for them until 1969 The term “donor-advised fund” not used by the IRS until the Pension Protection Act of 2006 (Pub. L. No. 109-208) Today, DAFs are holding more than $80B in assets; account for close to 6% of all charitable giving (more than $22.2B in 2015) Clyde Kunz & Associates

Donor-Advised Fund (DAF) From the IRS….. “A donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account.” Clyde Kunz & Associates

Donor-Advised Fund (DAF) A philanthropic vehicle established at a public charity (aka ‘sponsoring organization’): National Charity (commercial-related) Community Foundation Single-issue Charity Donor makes contribution(s) to the DAF Donor receives immediate tax benefit Funds grow tax-free within the DAF Donor may then recommend grants from the DAF over time Clyde Kunz & Associates

Donor-Advised Fund (DAF) Donor may make additional contributions to the DAF Once given, the DAF belongs to the recipient sponsoring organization (not the Donor) Grants made to NPOs are grants from the sponsoring organization, not the Donor Donor may not receive benefits as a result of recommending the grant Clyde Kunz & Associates

How Donor-Advised Funds Work Clyde Kunz & Associates

Growth in Number of DAFs Under 100,000 in 2005 Clyde Kunz & Associates LLC

Growth of DAF Total Balances Under 100,000 in 2005 Clyde Kunz & Associates LLC

Growth in Avg. Size of DAFs Under 100,000 in 2005 Clyde Kunz & Associates LLC

A Philanthropic Trend? From 2005-2015, total charitable giving increased at roughly 4% per year For the same period, giving to DAFs increased at an average of more than 15% per year! Clyde Kunz & Associates

Comparing DAFs & Foundations From 2005 to 2015…. The number of Private Foundations (PF) grew 20% (from 67,736 to 81,802) The number of Donor Advised Funds (DAF) grew 143% (from 110,673 to 269,180) Avg. PF assets = $9.5M; Avg. DAF assets = $235K PF payout = 5-6% annually; DAF payout = 20%+ Clyde Kunz & Associates

DAF vs. Direct Gift to Charity Donor Advised Fund Sponsoring Organization has experience receiving various types of gifts Can make multiple contributions with just one securities trade Tax-deduction is up-front; giving can be spread over time Some DAFs may allow gifts to foreign charities Administrative costs to a DAF Giving can be anonymous Direct Gift to NPO Nonprofit may not be set up to accept securities, real estate, etc. If giving to multiple NPOs, several transactions required Must take tax deduction for gifts in the calendar year in which gifts are made Gifts to foreign NPOs may not be allowed No costs involved in making gifts Anonymity not assured Clyde Kunz & Associates

Comparing Sponsoring Orgs National Charities (Commercial) Community Foundations Single-Issue Charities Minimum investment Low minimums Low-to-moderate minimums Varies Fees Low fees (admin & investment) Low-to-moderate fees Investment options Many investment options Several investment options for most funds Generally very limited Endowments Current philanthropy only Both current & endowed philanthropy Successors May/may not allow for successor advisors Allow succession Grant-making Allow grants to multiple charities Generally restricted Anonymity As requested May/may not be possible Donor Advice Provide limited (if any) local community info Familiar with needs in local community May be limited to NPO and its partner organizations

Grant Recommendations from DAFs May not be made to individuals May not be used to pay pledges donors have made May not generate benefits to the donor May not be made to private foundations Are restricted to 501(c)(3) organizations, communities of faith, government agencies (such as schools) Clyde Kunz & Associates

NPOs Need to Know…. Thank-you letters to donor should never contain “tax deductibility” information Thank-you letters to anonymous donors can be sent to sponsoring organization for forwarding (commercial sponsors may/may not) Recognition lists should read: “The [name of fund] held at [sponsoring organization]” (or similar language) Donor benefits probably may be paid directly by donor Clyde Kunz & Associates

Thank You! Kunz@cox.net ● 520-977-4019 ● www.ClydeKunz.com