Enter the Split-Fund DAF.
With the Split-Fund DAF Model, donor contributions are received and split between a Designated Fund and a Discretionary Fund. Those assets are invested in pools as determined by the sponsor charity with the purpose of increasing the value of the fund over time and giving the donor more giving potential. The sponsor charity also sets a percentage of grants from that fund that must be recommended to the sponsor charity. Over the course of time, donors may recommend grants from the Designated Fund only to the sponsor charity and its initiatives. Donors may also recommend grants from the Discretionary Fund to support any permissible charitable organization, including, but not limited to, the sponsor charity.
This assures the sponsor charity will receive guaranteed gifts over the course of the fund’s life and also allows donors to retain an element of control over their philanthropic goals. Like any other DAF program, donors have the flexibility to make gifts of many different asset types. Donors are free to make contributions of complex assets such as stock, real estate, life insurance, or other assets to the DAF. Making gifts of complex assets allows a donor to avoid capital gains tax and still direct those dollars increasing the capacity to meet charitable goals.
The program administrator – in many cases the representative for the nonprofit working together with their investment managers – also can choose investment pools that align with their particular social consciousness. From aggressive to conservative investment options, administrators can match investment strategies with charitable giving timelines, increasing a donor’s giving power through the fund’s investment returns.
Just like a traditional DAF model, the Split-Fund model still allows donors the flexibility to recommend grants when the timing makes sense. If the sponsor charity is conducting a specific fundraising campaign, this charitable solution allows grants to be recommended from the fund during times of greatest need. If a donor is inclined to contribute to relief funding when disaster strikes, those funds will be in reserve for just such an occasion. Funds can also be used to meet annual tithing obligations and more.
Also like the traditional DAF model, a Split-Fund DAF can be used to create a legacy of giving. Use the fund to set up planned giving opportunities and perpetual giving. Set up the fund to grant the remainder to a charity of choice at death. This solution allows the donor to avoid the hassle of legal fees and set up a charitable legacy.
Finally, donors can use a “bunching” strategy to take advantage of charitable tax deductions to offset the standard deductions in off years with a Split-Fund DAF. By alternating charitable contributions to the fund with taking the standard deduction every other year, this strategy can maximize tax savings while still retaining charitable consciousness.
It really is the best of both worlds. So, if you are a nonprofit organization in the market for a Donor-Advised Fund program but have been unsure about how to ensure funds would be directed to your specific cause, a Split-Fund DAF could be the answer you’re looking for. Contact us at Ren today and let us help you get started on a philanthropic solution that meets your needs.
Give us a call at 800.843.0050 or send us an email at firstname.lastname@example.org and let’s work together to find a strategy for your nonprofit organization.