When advising clients on establishing a Donor-Advised Fund (DAF), financial advisors play a crucial role in ensuring that clients understand the implications, benefits, and responsibilities associated with this philanthropic vehicle. The following checklist is designed to guide financial advisors through the key considerations of Donor-Advised Funds:

Client Goals and Objectives

• Discuss the client's philanthropic goals and how a DAF aligns with their long-term charitable giving plans.

• Evaluate the client's financial situation to determine the suitability of a DAF in their overall estate and tax planning strategy.

Understanding Donor-Advised Funds

• Explain the concept, structure, and operation of DAFs, including the roles and responsibilities of the donor and the sponsoring organization.

• Clarify the tax benefits associated with contributing to a DAF, including deductions and the treatment of appreciated assets.

• Discuss the flexibility of DAFs in terms of timing of contributions and grant recommendations.

Choosing a Sponsoring Organization

• Review different DAF sponsoring organizations, considering their fees, investment options, grantmaking policies, and any specific focus areas or restrictions.

• Choose a DAF sponsor that allows the DAF to be managed as part of the clients’ broader portfolio

• Select a DAF provider that can elevate the clients’ philanthropy by accepting a broad range of assets including private business interests, real estate and complex assets 

• Understand if the DAF provider permits international grants as well as domestic grants

Contribution to the DAF

• Discuss the types of assets that can be contributed to a DAF (e.g., cash, stocks, real estate) and the tax implications of each.

• Review the process for transferring assets to the DAF, including valuation requirements for non-cash assets.

• Explain the timing considerations for contributions, especially in relation to tax planning and deduction limits.

Grantmaking from the DAF

• Outline the process for recommending grants from the DAF to charitable organizations, including any restrictions or limitations imposed by the DAF sponsor.

• Discuss the potential for anonymity in grantmaking and the implications for the client.

Succession Planning

• Review options for succession planning within the DAF, including appointing successor advisors and the possibility of creating a legacy of charitable giving.

• Advise on the legal implications of succession planning within the context of the DAF and the client's broader estate plan.

Monitoring and Reporting

• Explain the importance of monitoring the DAF's investments and grantmaking activities, including any reporting requirements by the sponsoring organization.

• Discuss the role of the DAF sponsor in providing tax receipts and other documentation for contributions to the DAF.

Review and Update Estate Planning Documents

• Ensure that the client's estate planning documents, such as wills and trusts, reflect their intentions regarding the DAF, including any bequests or designations related to the fund.

• Discuss how the DAF fits into the overall estate plan and whether any adjustments are necessary to achieve the client's objectives.

Ongoing Review and Consultation

• Establish a schedule for regular reviews of the client's DAF strategy in the context of their changing financial situation, tax laws, and philanthropic interests.

• Encourage open communication with the client to address any new concerns or opportunities related to their DAF.