10 Fundraising Strategies for Complex & Major Gifts During COVID-19

The following guest blog post is from philanthropy researcher Russell N. James III, JD, PhD, CFP^®. He originally posted it on LinkedIn, and I’m reposting it here with Russell’s kind permission. I’m reposting the piece because of the enormous importance of the subject and the valuable information it contains.

Engaging donors in planned-giving conversations is still possible during the coronavirus pandemic. Last week, Russell and I shared our FREE whitepaper “Legacy Giving: The Best of Times or the Worst of Times?” Now, I want to share Russell’s 10 charitable planning strategies you should keep in mind when seeking complex and major gifts during these challenging times:

 

The market went down. A lot. The economy is temporarily frozen. Unemployment may increase dramatically. In the past, all of these things have been bad for charitable giving. We can’t control that. So, what can we control? What strategies make sense for fundraising, in particular for complex and major gifts?

Here are ten charitable planning concepts to keep in mind.

1.    Crisis is the time to show support

A social/friendship/family relationship encourages sharing. A transactional/market/exchange relationship does not. We see this in fundraising experiments where family language (simple words and stories) consistently outperforms formal language (technical words and contract language). One of the defining moments that identifies a friendship relationship, rather than a transactional relationship, is during a crisis.

In our personal lives, we know this. When you might be in trouble, a good friend is one who reaches out to help. A friend visits you in the hospital. A friend comes to the funeral with you. A friend listens whenever trouble strikes. In time of crisis, reaching out with concern, help, or even a relevant gift reinforces this social/friendship/family type of relationship.

Ideally, the first contact with donors in a time such as this should begin with concern. Are you OK? Do you need anything? Can we help? Later, we can return to the typical donor-charity dynamic. (If you represent a cause related to public health or COVID-related assistance, that return may happen more quickly.) But, first we want to show friendship-like support during a time of crisis.

2.    The first giving conversations should be with DAF-holders

Requests made to donors with funded Donor Advised Funds will be successful earlier than requests made to others. During times of downturn and uncertainty, people are more likely to hold tightly to their wealth. This drives down charitable giving. But distributing funds already in a DAF doesn’t affect personal financial security.

During the last major economic downturn, many private foundations temporarily increased their distributions to help soften the blow for their grantees. The same reasoning can apply to individual donors who have already funded their DAFs. Due to tax planning strategies, many may have placed multiple years’ worth of future expected donations into a DAF. Given the current crisis, it makes sense to consider this as a time to empty those accounts earlier than originally planned.

3.    One-time special requests work, but be careful with a crisis

In fundraising experiments, people are more willing to donate in response to a special, one-time need than for ongoing needs. An appeal for one-time needs that arise as a result of the current turbulence may be particularly effective. In experiments, people respond more to appeals during a time of crisis. We are all sharing this experience together. We can work together to help overcome the effects of this hit.

However, it is important in such appeals to identify the crisis as a crisis for beneficiaries or for the cause, but not an organizational crisis. Projecting organizational instability might help get the $50 gift today, but it will come at the cost of the major donation later down the road. Major philanthropic investments don’t go to unstable organizations.

4.    Use planned gifts as your “Plan B”

During times of downturn and uncertainty, people are more likely to hold tightly to their wealth. Planned giving opportunities can help “lean into” this uncertainty.

Estate gifts take place only after the donor no longer needs the money personally. They can also be revocable. They can be a percentage of the estate, and thus can vary in size with financial ups and downs. These percentage gifts are actually much better for charities because they usually end up being much larger. (Fixed dollar gifts tend not to get updated for inflation.)

Irrevocable planned gifts can also help with financial uncertainty. These typically give the donor lifetime income or lifetime use of the donated property. Thus, the gift can be made while still protecting the financial security of the donor.

If a donor needs to back away from a commitment or feels that a future ask is too daunting, consider planned gifts as a “Plan B”. A response to such a refusal might include revocable or irrevocable planned gift options.

I certainly understand your concerns. I know others in your same situation who have decided to move their commitment into an estate gift instead. This provides flexibility with no upfront cost. There are even ways to do it that provide tax benefits. Would you be interested in learning more about these options?”

[This is followed by discussion of: 1) Gift in a will. 2) Beneficiary designation on an IRA/401(k), avoiding income taxes that heirs would otherwise have to pay. 3) Retained life estate, creating an immediate income tax deduction, discussed below.]

I certainly understand your concerns. I know others like you who have decided instead to make a gift that gives them lifetime income. With interest rates being so low and the market being so volatile, many people like the fixed payments coming from a charitable gift annuity. Would you like to learn more about this?”

5.    A charitable gift annuity as a two-stage gift

For those representing stable institutions offering Charitable Gift Annuities (CGAs), this may become a particularly attractive gift. A CGA usually trades a gift for annual lifetime payments to the donor (or donor and spouse). During times of uncertainty, the guarantee of fixed payments from a stable institution can be attractive. Following the last dramatic drop in the market in 2008, some large, stable organizations reported receiving exceptionally large CGAs. These very large gifts would normally have been structured as a Charitable Remainder Trust. But during extreme volatility, donors instead preferred the certainty and stability of payments guaranteed by the organization rather than payments tied to investment returns.

A charitable gift annuity can sometimes be presented as a two-stage alternative when uncertainty prevents a normal gift from being made.

I certainly understand your concerns. Another donor like you was in your same situation and she decided to protect against all this volatility by making the gift in two stages. First, she made a gift that gave her annual payments for life. If things go downhill, she has that income. But, if everything turns around and she ends up not needing the extra money, then she can donate those future payments as a second gift.”

Section II: Wonky Charitable Tax Planning Opportunities

New Charitable Giving Incentives in CARES Act

At the end of last week, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The $2.2 trillion rescue package comes in response to the economic fallout from the coronavirus pandemic. The measure contains a number of provisions to encourage greater charitable giving including:

Universal Charitable Deduction Provision. Taxpayers who are non-itemizers may take an above-the-line deduction for charitable giving up to $300 in cash contributions during 2020. Contributions to Donor Advised Funds are not eligible. While the provision was intended to be temporary, the law itself states it “begins in 2020” and does not contain a sunset date, according to Jason Lee, former Chief Advocacy and Strategy Officer and General Counsel at the Association of Fundraising Professionals. That means that the provision might extend beyond 2020, something advocacy groups will seek to ensure along with trying to raise the $300 cap.

Increase of Itemizer Charitable Giving Cap. For 2020, the CARES Act eliminates the current cap on annual deductible-contributions for those who itemize. The law raises the cap from 60 percent of adjusted gross income to 100 percent.

Corporate Giving Incentives. The law raises the annual giving limit from 10 percent to 25 percent of taxable income. Furthermore, corporations will be permitted to increase deductions for food donations with the cap increasing from 15 percent to 25 percent of taxable income.

Non-philanthropic Provisions for Nonprofits. The law contains several other provisions that can directly benefit nonprofit organizations while not involving philanthropy. The National Council of Nonprofits has prepared a summary of these key provisions, which you can find by clicking here.

Fundraising Reality Check: 5 Things You Need to Know

A number of myths continue to persist in the fundraising world. While I can’t debunk all of them here, I can deliver a reality check for five important items that I’ve encountered recently when talking with fellow fundraising professionals:

Myth 1: Most People Do Not Own Stocks

Reality Check: The fact is that a majority of Americans own stocks in one form or another. Gallup found that 55 percent of Americans have stock market investments. The greater one’s income, the more likely they are to own stock.

While the stock markets remain volatile, they continue to set new records. In other words, many charity donors own appreciated securities. Under the current federal tax code, anyone can benefit by contributing appreciated stock to a nonprofit organization. That’s because donors of appreciated stocks can avoid paying capital gains tax even if they are non-itemizers who take the standard deduction.

If you’re not asking your prospects and donors to donate appreciated securities, you’re not serving them well and you’re missing out on donations that could be quite significant. So, be sure to let people know that your organization accepts stock gifts, what the benefit is to donors of contributing stocks, and how they can gift stocks.

Myth 2: Giving Tuesday Will Help You Raise Tons of Money

Reality Check: I’m not opposed to #GivingTuesday. My problem with it is that many charities invest an amount of staff and budget resources that will never be justified by the return. In 2018, US charities raised $380 million, reports the Nonprofit Source. For perspective, that’s just 0.089 percent of overall philanthropy for the year. Furthermore, while 63 percent of Giving Tuesday donors give only on Giving Tuesday, we really don’t know if that’s a correlation or a causality; many of those donors might have given anyway on another day.

If you’re going to implement a Giving Tuesday appeal, do it the right way:

• Have realistic expectations and invest resources accordingly.
• Remember that a date on the calendar is not a case for support. Don’t ask people to give to your organization just because it’s Giving Tuesday. Let them know what problem their gift will address.
• Have a thank-you and stewardship plan in place if you want to retain and eventually upgrade Giving Tuesday donors.

Myth 3: Charities Can Ignore Donor-Advised Funds

Reality Check: Okay, charities can ignore Donor-Advised Funds. However, they should not. DAFs accounted for 12.7 percent of overall philanthropy in 2018 compared with just 4.4 percent in 2010, according to The National Philanthropic Trust’s The 2019 DAF Report. In other words, DAF grant payouts totaled $23.42 billion. Total DAF charitable assets were $121.42 billion and climbing. The number of DAF accounts in 2018 was 728.563, a 55.2 percent increase over 2017.

The simple fact is that DAFs continue to grow in significance year after year. More and more donors are creating DAFs. You need to make it easy for people to recommend grants to your charity. You need to properly steward DAF donors and those who recommend DAF grants. You need to keep track of which of your supporters has established a DAF. You need to remind people that, if they have a DAF, they can recommend your charity for a grant.

It’s All Up to You Now

It’s that time of year once again. It’s the season when most charities raise the most amount of money, perhaps because that’s when most fundraising activity happens. However, how tough will it be to raise money as the end of 2019 approaches?

You might be concerned about a recession on the horizon. You should be. We’re experiencing a record for sustained economic growth that quite simply can’t go on forever. A recession is bound to hit eventually even without factoring in trade wars, political turmoil, disruptions to the global oil supply, and the threat of foreign wars.

Among ultra-wealthy Americans, those with an average worth of $1.2 billion, 55 percent believe the US will enter a recession within the next year, according to the UBS Global Family Office Report. About 45 percent of respondents are sufficiently concerned that they are boosting their cash reserves, and 45 percent are realigning their investment strategies to mitigate risk.

While recession fears loom, a major economic downturn has yet to take shape. In other words, the economic climate is currently good from a fundraiser’s perspective. Could it be better? Sure. Always. But, it’s plenty good enough for you to anticipate a successful year-end fundraising effort. Consider some of the following six economic factors (as of Oct 4, 2019):

Gross Domestic Product. GDP is growing at a rate of 2.0 percent. Overall philanthropy historically correlates closely with GDP. So, if GDP goes up, we can anticipate that philanthropic giving will also increase.

Unemployment. The national unemployment rate is 3.5 percent, the lowest since 1969. If more people are working, more people will likely have funds with which they can donate.

Wages. Wages have increased 2.9 percent over 2018. Individual giving closely correlates to personal income. So, if personal income is rising, we can anticipate a rise in individual philanthropy.

Stock Market. The stock market, while volatile, has been performing well. This year, the Dow is up 13.92 percent, the NASDAQ is up 20.30 percent, and the S&P is up 17.76 percent. This is good for fundraising for two important reasons worth mentioning here. First, stock growth means that foundations and donor-advised funds will have more money with which to donate. Second, many individuals own stocks that have appreciated in value. When donating appreciated stocks, individual donors can avoid capital gains tax. In other words, even if someone can’t claim a charitable gift deduction under the current tax code, they can still derive a tax benefit by contributing appreciated securities.

All You Need to Know about Decrease in Itemized Charitable Deductions

When it comes to philanthropic trends, recent media reports have left many fundraising professionals lost in the weeds and confused by misleading analysis. So, I’m going to give you the most important insights about individual giving that you need to know now along with three practical tips.

First, here’s some quick background. Overall, charitable giving reached an historic high in 2018 with $427.71 billion contributed, according to Giving USA 2019. Despite this great news, individual giving, excluding bequests, fell 1.1 percent to $292.02 billion. There are many reasons for the slight dip, which you can read about in one of my prior posts. One of the factors that may have played a role is the new tax code. With it, we saw a dramatic increase in the number of taxpayers taking the standard deduction and a drop in the number choosing to itemize their deductions.

That brings us to a big takeaway that almost no one is talking about:

The charitable tax-deduction is not a substitute for a solid case for support.

This was true prior to passage of the Tax Cut and Jobs Act; it’s even more true today. Before the new tax code went into effect, less than one-third of taxpayers itemized their returns, and less than one-quarter of taxpayers claimed a charitable tax-deduction. Now, only about 10 percent itemize and 8.5 percent claim a charitable deduction, according to the Tax Policy Center. To put things another way, for the majority of donors, tax issues were never a viable consideration when it came to charitable giving. Today, tax considerations are an issue for even fewer people.

This all means that the classic, but foolish, year-end appeals touting the tax benefit of giving before December 31 are even more irrelevant than ever. Furthermore, it means that the relevance of the idea of year-end giving itself has been diminished. If someone doesn’t need to do year-end tax planning, why would they need to wait until year-end to donate? The reality is most people can give at any time with the same effect on their finances.

In light of all of this, here are the three things you should do:

Do Not Fall for Newsweek’s Fake News!

You might have seen it recently. Sophie Penney, PhD, President of i5 Fundraising, saw it and then asked me what I thought. So, thank you for the question, Sophie; here goes…

Newsweek posted an article with this headline: “Trump Tax Plan Leads to $54 Billion Decline in Charitable Giving.”

There’s only one problem: IT IS NOT TRUE!

Shockingly, not even the body of the article supports the headline. Instead, the writer talks briefly about a $54 billion drop in itemized donations NOT a $54 billion drop in giving. This does NOT mean there was a $54 billion drop in actual giving. With fewer people itemizing their taxes, of course there would be fewer itemized donations. However, that does not mean fewer donations. Many donors will continue to give and continue to give generously despite not being able to itemize. By the way, the writer provided no source for the $54 billion figure.

The article furthers its doom-and-gloom theme by asserting that there was a 1.7 percent decline in overall charitable giving. However, the writer did not mention that that figure was for inflation-adjusted dollars. In real dollars, giving actually went up $2.97 billion (0.7 percent) between 2017 and 2018, and now stands at $427.71 billion, the highest level of all time, according to Giving USA 2019. Even if we look at inflation-adjusted dollars, giving in 2018 was the second highest in recorded history. Not bad.

If we want to understand the current philanthropy environment, we need to have an honest conversation using real information. In a previous post, I identified several factors affecting charitable giving:

I Told You So: Charitable Giving is Up!

Most charity pundits, mainstream media, and press serving the nonprofit sector got it wrong. Sadly, none of them is admitting their mistake, and many are continuing to advance a false narrative. However, I always told you the truth, and I’ll continue to do so.

I’ve often encouraged you not to overuse statistics in your appeals. But, we can all certainly benefit from reading lots of illuminating statistics.

In 2017 and 2018, most pundits and the media were convinced that the Tax Cut and Jobs Act would result in up to a $21 billion decrease in philanthropic giving. In January 2018, I joined a tiny group of professionals who predicted the decrease in giving would be far less than that and giving might actually increase. This was not a guess on our part, but a well-educated expectation based on research, experience, and observation.

Now, with the release of Giving USA 2019, we know who was correct.

Overall, philanthropic giving in constant dollars INCREASED by $2.97 billion (0.7 percent) between 2017 and 2018, and now stands at $427.71 billion, the highest level of all time. Relative to Gross Domestic Product, giving remained at 2.1 percent, which is greater than the 40-year average of 2.0 percent.

Despite the generally good news, the philanthropy scene is not entirely positive. When adjusting for inflation, giving in 2018 did decline by 1.7 percent, though that was much less than the doom and gloom estimates. Furthermore, giving by individuals as a share of overall philanthropy accounted for 68 percent; this is the first time since at least 1954 that it has fallen below 70 percent. In 2018, individual giving fell by 1.1 percent in constant dollars.

While the new tax code likely had an effect on charitable giving, we need to be careful not to overstate its impact. A number of factors have influenced giving:

New Tax Code. All or part of the decline in individual giving in 2018 could be due to donors taking action in advance of the tax law change. We saw this in 1986 when there was a spike in charitable giving in advance of the Reagan tax cuts in 1987.

In 2017, many donors likely front-loaded their philanthropic giving since they would no longer be able to deduct gifts beginning in 2018. In addition, many donors chose to bundle their philanthropy by contributing to Donor-Advised Funds at record levels in 2017. Together, these two factors might explain the 1.1 percent decrease in individual giving in 2018 compared to a 5.7 percent increase in 2017. If not for the new tax rules going into effect in 2018, some of those 2017 donations might have been made in 2018 instead.

The tax code might also affect giving in other ways that we just don’t see clearly at this point. Just as we had to wait until 1988 to see giving normalize following the Reagan tax cuts, we may need to wait another year or two to understand the full effect of the current tax code.

Decline in the Number of Donors. Since 2001, the percentage of US households contributing to charity has fallen steadily from a high of 67.63 percent to 55.51 percent in 2014, according to data from the Indiana University Lilly Family School of Philanthropy’s Philanthropy Panel Study. In other words, the new tax code is not responsible for a sudden decline in the number of donors. This trend has been going on for years.

Have You Done Something Stupid to Alienate Donors?

As 2018 drew to a close, my wife and I received a few good emails from nonprofit organizations. I even highlighted one of those in a recent blog post. Unfortunately, we received far more fundraising appeals that I can only describe as stupid.

The garbage email appeals simply mentioned that December 31 was fast approaching and, therefore, I should donate to that particular charity while there was still a chance to do so in 2018. Doing multiple count-down to year-end emails simply magnified the annoyance.

So, what’s the problem with that? Let me make it simple and clear:

The calendar is not a case for support!

Jack Silverstein, Vice President of Financial Development at the National Capital Region YMCA-YWCA (Ottawa, Canada), shares my frustration over this. He recently posted his views in “People Know When the End of the Year Is!!!” I encourage you to read it though it does contain a word some may find offensive.

Because I agree with Silverstein, I want to provide some highlights for you.

Your prospects and donors know when the year ends. They don’t need you to remind them. They’re not idiots.

With most charities engaged in year-end fundraising, people want to know why they should give to your nonprofit organization and why they should do so at the end of the year. The mere fact that it is year-end is not a reason. People can donate to any charity at year-end or, for that matter, at any time of year. You need to inspire them to give to your organization. In other words, you need to make a case for support.

A related mistake that charities frequently made was to highlight the tax-deductibility of donations. In the USA, some have estimated that as few as 10 percent of taxpayers will itemize. It’s only that small population that might be able to take advantage of the tax-deductibility of a contribution. However, even among that population, tax benefit is a low ranking reason why people donate. Furthermore, it’s no reason whatsoever why they should donate to your organization; after all, people can get the same tax benefit by donating to any qualified charity.

When charities send such terrible appeals, they are not being donor centered. Instead, Silverstein asserts:

Here are 3 Simple Steps to Avoid a Year-End Appeal Disaster

We’re now in the fourth quarter of the calendar year. It’s that special time of year when most charitable giving happens. That’s due, in part, to the fact that charities are out in force soliciting contributions as the year nears a close.

While there are many things you can and should do, I’m going to keep it easy. I’m going to give you three simple steps (and a bunch of useful tips) that will help you avoid a year-end appeal disaster:

Step 1 – Make a Year-End Appeal: You should test doing a beginning-of-the-year appeal in January/February since tax-avoidance is less of an issue for more people under the new tax code (see my post about this by clicking here). However, the fourth-quarter season-of-giving certainly remains the traditional time to ask for support. So, unless you have data for your organization that suggests otherwise, make sure you have a year-end appeal. The surest way to have a disastrous year-end fundraising appeal is not to have one.

As you plan your appeal, be sure to segment your prospect file. Treating your prospects as one homogeneous group may make your job easier, but it won’t help you keep your job. You’ll achieve much better results if you segment your prospect pool and target each segment with a tailored appeal.

For example, your message to existing donors will be different from your message to acquisition prospects. For starters, you’ll want to thank existing donors for their support before asking for another gift. Other segments might include monthly donors (You do have a monthly-donor program, right?), volunteers, past service recipients, event participants, etc.

In addition to tailoring your message to each segment, be sure to customize the ask. It’s inappropriate to ask an acquisition prospect for $1,000. Conversely, it’s also inappropriate to ask a $500 donor for $50. Just as bad, it’s a horrible mistake to not ask for a specific dollar amount or not to ask at all.

Step 2 – Have a Solid Case for Support: If you want people to give money to your organization, you need to make a compelling case for support. This is particularly true at this time of year when virtually every other nonprofit organization is out there looking for donations, too. Why should people respond to your direct-mail appeal (or phone solicitation, or face-to-face ask, etc.) instead of the appeal from another organization, perhaps one with a similar mission to yours? Address that question, and you’ll have greater success.

A strong case for support is particularly important when appealing to folks who have already contributed this year. They’ll want to know how you spent their money, the impact they have already had, and why you need more. Tell them those things, and you’ll increase the chance of getting another gift.

In addition to having a solid case for support, you’ll want to create some urgency. Why should people give to your organization now? If you’re the Salvation Army, people automatically get why you’re asking around holiday time. For pretty much any other organization, you’ll have to give prospects a good reason. And if that reason magnifies the impact that the donor’s gift will have, so much the better.

For example, you can have a challenge grant that matches all gifts received through the end of the year. Or, you could have the cost of your appeal underwritten by a major donor so you can legitimately tell prospective donors that 100 percent of their contributions to the appeal will go toward mission fulfillment. Both of these ideas will create urgency while magnifying the impact your donors can have.

It’s Time to Stop Whining about Donor-Advised Funds!

The New York Times whined recently about Donor-Advised Funds in an article carrying the headline, “How Tech Billionaires Hack Their Taxes With a Philanthropic Loophole.”

While you personally might not complain about DAFs, you can sure bet some of your organization’s senior staff and board members may line up with some of the experts cited in the misleading piece in the Times.

I’m here to tell you and others that it’s time to stop whining about DAFs. Regardless of how you feel about them, DAFs have been with us since the 1930s, and they’re not likely to go away anytime soon. So, you and your organization will be far better off if you understand how to benefit from DAFs.

I’ll give you six tips. However, as a former newspaper editor, I feel compelled to first bust the myths peddled by the Times.

“Billionaires.” The Times seems to suggest that DAFs are a tool being used by and only available to billionaires. David Gelles writes, “DAFs allow wealthy individuals like Mr. Woodman to give assets — usually cash and stock, but also real estate, art and cryptocurrencies — to a sponsoring organization like the Silicon Valley Community Foundation, Fidelity Charitable or Vanguard Charitable.” While many wealthy individuals establish DAF accounts, so do middle class people. Some sponsoring organizations require just a $5,000 contribution to create one.

As a result of the new tax code, some donors will no longer itemize deductions on their tax returns because of the increase in the standard deduction. However, if they are close to being able to itemize beyond the standard deduction, some will choose to bundle their charitable giving. In other words, they’ll give in some years but not others. In the years they give, they’ll itemize. One way some of these donors will give is to establish a DAF with a large contribution in a given year. Then, they’ll continue to support their favorite charities each year by recommending annual grants from their DAF account.

The bottom-line is that DAFs are not just for the super-wealthy.

“Hack Their Taxes with a Philanthropic Loophole.” The headline in the Times lets you know the reporter’s inappropriate bias right from the start. The wealthy are not doing anything cute, clever, sloppy, or nefarious by creating a DAF. Any donor who creates a DAF is simply following the clearly written provisions of the law.

If giving to charity is a “hack” in the pejorative sense, if receiving a charitable-gift deduction for donating to a nonprofit organization is exploiting a “loophole,” then perhaps we should do away with the deduction for donations all together. However, can we agree that would be stupid?

The bottom-line is that setting up a DAF is no more evil than creating a foundation or trust or, for that matter, giving directly to a charitable organization. Donors who engage in careful tax planning have more disposable income or assets, which has historically led to more giving.

“Charities Can Wait for Funds Indefinitely.” Gelles writes, “So while donors enjoy immediate tax benefits, charities can wait for funds indefinitely, and maybe forever.” He goes on to state that foundations are required to give away five percent of their assets each year, but DAFs have no similar requirement. That’s true, but…

While DAFs are not required to make minimum distributions, the average DAF distributes far more than the minimum required of foundations. According to the 2017 Donor-Advised Fund Report, compiled by The National Philanthropic Trust, DAFs contributed 20.3 percent of assets to charities in 2016, the most recent year for which data is available. For the third year in a row, growth in grants from DAFs has outpaced the growth of giving to DAFs.

Why would a donor just let money sit in a DAF account “forever” after setting up the irrevocable account? While the sponsoring organizations would love that – they earn fees for managing the accounts – a donor derives zero benefit from warehousing money in a DAF, beyond the initial deduction. Instead, donors benefit when that money can be put to good use. Furthermore, they’ll benefit when the recipient charities recognize their support and express their gratitude.

The bottom-line is that most donors have no interest in warehousing their money. They want to use their DAFs to help build a better world. It’s the job of fundraising professionals to inspire these people to recommend grants from their DAF accounts.

“Philanthropy is Becoming Less Transparent.” The article quotes David Callahan, author of The Givers, as saying, “The world of philanthropy is becoming less transparent, and that’s not a good thing.” While I’m not really sure what point Callahan was making, the Times wants us to believe that DAFs are part of the transparency problem as people use them to hide their giving.

A few years ago, I was curious about how secretive DAF grantmakers really are. Here is what I was able to report:

Vanguard Charitable reports that 95 percent of its grantmakers share their name with the charities they support. Schwab Charitable, another large DAF management organization, says that 97 percent of its grantmakers share their name. Fidelity Charitable reports that 92 percent of its grantmakers provide information for nonprofit acknowledgment. This means that charities are able to continue to cultivate and steward these donors.”

The bottom-line is that when donors are inspired to give through their DAF, they almost never do so secretively.