Donor-advised funds (DAFs) are an increasingly popular and smart way to support charitable causes, but donors, advisors and nonprofits often have questions about the most exciting part of a DAF – recommending grants. This short guide gives you the information you need about the DAF grant recommendation process, so you can use the fund to reach your charitable giving goals.
How to recommend grants
Once a DAF is funded, donors can use our platform to recommend grants to their favorite charities. After specifying the charity, the amount, and any special instructions for the grant (like remaining anonymous or giving a gift in memory of someone), our team springs into action. Internally, we vet the charity to verify it is an IRS recognized 501(c)(3) charity eligible to receive grants from a DAF, and if all is well, we write the check and mail it to the donor’s charity.
Important Grant Facts
While the sponsoring charities ultimately decide how the funds are distributed, the donor recommends which charities and causes receive grants. The donor who invests in the DAF recommends grants for their lifetime, but they can pass down responsibility to a successor – leaving a legacy of giving for generations to come.
Donors can choose to make grants immediately from their account or delay their giving, and there is no limit on the number of grants donors can make. Recurring grants can also be set up monthly, quarterly, semi-annually, or annually. These are a favorite feature of those who use their donor-advised fund to tithe or donate during a certain time of year, like the holidays or GivingTuesday.
Grants can be given in another individual’s name. This is a common question for those who want to request grants in honor of a loved one. Grants can also be given anonymously for donors who wish to remain unknown.
If the active charitable organization is classified as a 501(c)(3) public charity by the IRS, it is eligible for grant funds from a DAF. And while most religious organizations aren’t listed as 501(c)(3) organizations, they are considered eligible for DAF grants since they are tax-exempt charitable organizations. Grants can be designated to a variety of causes like health and human services, environmental, animal welfare, religious, art and culture, education and many more. As a matter of fact, DAFs are gaining popularity with donors who are eager to find ways to invest in causes for the greater good.
A note on Foreign Charitable Organizations – It may be possible to make grants to certain foreign organizations, but extra fees may apply for additional due diligence and processing costs.
While DAF grants can support a wide variety of causes, there are some restrictions set in place to ensure funds are given to qualified organizations. Grants cannot be designated to individuals, private non-operating foundations, political parties or candidates, existing pledges, and or for any personal benefit.
Learn more about donor-advised funds here and if you have any questions about donor-advised funds or charitable giving, please get in touch with us. We’re here to answer your questions and help you put your clients on the right path to reach their charitable goals.