Donor-advised funds (DAFs) allow a donor to make a charitable contribution to the fund and then direct the institution holding the fund to disperse funds to qualifying nonprofits at a later date. But what happens to the funds after the death of the donor? David Torre, a wealth strategist and adjunct instructor with the Edyth Bush Institute for Philanthropy & Nonprofit Leadership at Rollins College, has written about this issue: Donor-advised funds: Planning for the exit. He explains why it’s important and how donors can find out about their options:
“Succession is a piece of the DAF conversation that is often skipped over. It’s treated as an afterthought, but it could be pretty important when the time comes — just as succession for the family business is important, or for who is going to administer a trust. People are putting big dollars in DAFs, funding them in life and at death. It pays to take a little thought to button that side of it up.
“The creator of a donor-advised fund can select what they want to have happen when they’re not around anymore. Most people pick another human being to recommend grants, such as a spouse or child, but that’s not the only option. The options vary by provider, but there are more creative options out there than you might have realized.
“The DAF vehicle, by law, has no minimum grantmaking activity requirements. But, when you go to a DAF sponsor, they have their own internal policies. They might say that you must send out at least $250 every two calendar years, for example, and if you don’t and they don’t hear from you, it might trigger the succession option on file. If there is no succession option on file, then the default is usually that it goes to the control of the sponsor. There are other options, but DAF creators need to take a look at their succession plans.”
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