Dear FFTC Team,

I’m the development manager for a local nonprofit. Recently I’ve been hearing a lot about donor advised funds, but am not sure whether to think of them as a threat – or an opportunity. What are donor advised funds? And how can I incorporate them into my fundraising strategy? – Fearless Fundraiser

Dear Fearless,

Donor advised funds are a convenient tool for donors. They were created in the 1930s but have grown dramatically in popularity in recent years. U.S. tax law allows donors to contribute to their funds when they are ready and to recommend grants to as many 501(c)3 public charities as they choose on their own timeframe.

This flexibility allows donors to give and receive the tax benefit, even if they have not yet identified exactly which organizations they wish to eventually support. They may also be saving up to provide a larger, more impactful gift.

What does this mean for you? A growing number of your prospects may have donor advised funds, which means they already have money set aside that can only be used for charitable giving. In addition, recent research indicates that 60% of grants from donor advised funds are for unrestricted uses. This is a huge opportunity for you!

Here are a few tips for fundraising from prospects with donor advised funds:

• When you have conversations with prospects, ask if they have a donor advised fund.
• Include donor advised funds as a method for support in your fundraising messages, website and marketing materials – sometimes people just need a reminder!
• Remember to thank your donors for gifts received from donor advised funds, even though a tax acknowledgement is not required.

A few additional resources that you may find helpful:

• Making the Most of Donor Advised Funds, a webinar presented by FFTC and AFP Charlotte.
• How Nonprofits Are Leveraging Donor Advised Funds, a podcast presented by Stanford Social Innovation Review.
• 3 Steps to Take on Donor Advised Funds in 2021, presented by Patrick Schmitt, the Co-CEO of FreeWill.
• DAF donors showed us who they were in 2020, by Eileen Heisman, CEO of National Philanthropic Trust.