If you use a donor-advised fund (DAF) to make charitable contributions, it’s likely you have an undistributed balance. If that’s the case, the old saying “There’s no time like the present” has rarely been truer than it is right now.
Nearly 80 percent of all philanthropy in the U.S. comes from individuals. Individual donors give four times more than philanthropic institutions, including foundations. Despite these generous figures, annual donor payouts from donor-advised funds average around just 20 percent of total DAF balances, meaning 80 percent of DAF dollars are not distributed annually.
As local, national, and global economies wrestle with the impacts of the coronavirus (COVID-19), people in every community are struggling. People who were already vulnerable are particularly in need. The nonprofit, charitable, and community organizations that are often a safety net and the underlying fabric of a community are also toiling to keep up with client and constituent demands. At the same time, their funding and support—whether from individuals, the public sector, or the private sector—is declining at breakneck speed.
You have an opportunity to take a few easy steps now that could make a material difference in how organizations and communities can respond to immediate needs and begin to think about recovery and rebuilding after COVID-19.
Why is it crucial to act now?
Communities need all the support they can get during this crisis. One of the benefits of philanthropy is that it can respond quickly and immediately. Government support, which is intended to be significant and long term, will take time. Your dollars can help right now in these critical moments.
Many nonprofit and charitable organizations, from art museums to food banks to afterschool sports programs, rely on income from events, program registration fees, and other fees for services they cannot currently provide. Without this income, they can’t pay salaries, benefits, rent, or any number of other expenses to keep their doors open. Individual donor dollars will be a significant factor in these organizations’ ability to weather this storm.
Right now, every dollar and each day counts. Dollars held in a DAF cannot provide benefit to the issues, causes, and communities you care about until they are distributed. And remember, any tax benefit you or your financial advisor desired was achieved once you contributed to your DAF; there is no additional tax benefit gained by keeping a DAF balance.
How do I get started?
If you’ve been holding off on a full distribution from your donor-advised fund for any reason, now is the time to act. Here are three immediate steps you can take:
- First, keep supporting the organizations you’re already giving to. They will need your consistent contributions over the coming weeks and months. Make sure you’ve reached out to them to understand how else you can be of help.
- Next, if you’re able, give to your local COVID-19 response fund. In many communities, these funds are being organized and held by local community foundations, with funds rapidly being distributed to organizations on the front lines of response across the community.
- Finally, if you’re looking for support in planning, research, or fund distribution, there are a wide range of organizations such as community foundations, philanthropic advisors, and online resources that can help you ensure your giving goes where it’s most effective and best aligned with what you care about. As you’re thinking about how you’ll distribute the balance of your DAF in the next 30 days, make sure to check out some good practices from a collection of foundations across the country.
Thank you in advance for the action you’re about to take.