Barron J. Damon is a strategic leader in the non-profit sector with 20-plus years of experience as an Executive of a National Non-Profit.  Barron is a Philanthropist, and a Certified Professional Philanthropic Coach through the International Coaching Federation.  He has also been featured in several magazines and a special guest on TV, radio shows, and podcasts discussing topics related to philanthropy, youth development, business, and travel. Here, he discusses whether you are playing hide and seek with your donor-advised fund. 

Imagine having your magic wallet, where you deposit funds for giving, watch them grow tax-free, and then decide when and where to make charitable donations. That's the essence of a Donor Advised Fund (DAF) — a charitable giving account administered by a sponsoring organization, such as a community foundation or financial institution. It allows individuals, families, and organizations to make tax-deductible contributions of cash, securities, or other assets to support charitable causes.

Although they can be a powerful tool for offering individuals and families a strategic and impactful way to manage charitable giving. However, treating your DAF like a game of hide and seek—keeping it hidden or underutilized—could hinder its potential for making a significant difference in the world.  At times donors can be overwhelmed by searching for clarity amid the abundance of options. Let's explore how you can navigate and maximize your DAF for a fun and fulfilling philanthropic experience.

Donors need clarity and information

I used to love playing hide and go seek when I was growing up and even as an adult at times. Donors can feel a bit like they are playing hide and seek, searching for clarity among the abundance of options regarding their philanthropic opportunities. According to the 2018 U.S. Trust®  Study of High Net Worth Philanthropy conducted in partnership with the Indiana University Lilly Family School of Philanthropy, the greatest challenges donors face when it comes to charitable giving is identifying what causes they care about and deciding where to donate (45%).  Obtaining a clear understanding of how DAFs function, their benefits, tax implications, and operational mechanisms is crucial for donors to maximize the impact of their charitable contributions. Clarity empowers donors to navigate the complexities of DAFs, allowing them to make strategic choices aligned with their philanthropic goals. Access to transparent information regarding investment options, fund management fees, grantmaking processes, and the impact assessment of their contributions fosters confidence and trust, enabling donors to make well-informed decisions that align with their values and aspirations for meaningful social change.

Rules to playing the donor-advised fund game and not hide and go-seek

Rule #1: No hiding allowed

Just like in hide and go seek, the first rule of playing with DAFs is not hiding your intentions! One might be tempted to squirrel away funds in a DAF without a clear plan for giving. However, the real fun begins when you engage actively in the grantmaking process, unleashing the power of your DAF and putting it to work by making strategic and impactful grants to causes that matter to you.

Rule #2: Strategic philanthropy - Seek impactful giving opportunities

In hide and seek, strategic hiding spots ensure success. In philanthropy, strategic giving leads to impactful outcomes. Use your DAF strategically by researching and identifying charitable organizations aligned with your values and goals. Seek out causes that resonate deeply with you and have a track record of creating meaningful change.

Rule #3: Engage in collaborative giving

Playing hide and seek is more enjoyable with friends. Similarly, collaborative giving enhances the philanthropic experience. Invite family members or friends to join in, pooling resources in your DAF for collective impact. Engage in conversations to collectively decide on impactful causes to support. Some rules apply here so make sure you get clarity from the institution of your Donor Advised Fund.

Rule #4: Shine a light on transparent giving

In hide and seek, being visible makes the game more exciting. Similarly, transparency in philanthropy is crucial. Embrace transparency by utilizing your DAF's reporting tools to track grants, evaluate impact, and ensure funds are allocated to organizations with transparency and accountability.

Rule #5: Don't keep your DAF idle - Seek active participation

Just as hiding too long in hide and seek takes away the fun, leaving your DAF idle limits its potential. Seek active participation by regularly reviewing your fund, making recommendations for grants, and staying engaged with the charitable organizations you support. You want to avoid the call from the account administrators that they will close your DAF account if it's been idle too long. 

Rule #6: Tax benefits - Seek financial advantages

Utilizing your DAF strategically can also offer tax benefits. Seek guidance from financial advisors, tax professionals, and a Philanthropic coach to understand the potential tax advantages of contributing to and granting from your DAF. This can maximize the impact of your charitable giving while optimizing tax benefits.

The final countdown: Seek, find, and give

Playing hide and seek with your Donor Advised Fund can be fun in the game but not in philanthropy. By actively engaging with your DAF, seeking impactful giving opportunities, collaborating, embracing transparency, and utilizing its potential, you can elevate your philanthropic journey.

Remember, the joy of strategic philanthropy lies not in hiding your resources, but in seeking meaningful opportunities to create a positive impact in the world. So, don't play hide and seek with your DAF—unveil its potential and enjoy the fulfilling journey of making a difference through purposeful and strategic giving using your magic wallet also known as a Donor Advised Fund.

Find out more about Barron here: www.barrondamon.com