(image from https://bit.ly/4aT1Mfh)
Donor-advised funds (DAFs) continue to grab a lot of headlines in the nonprofit sector and beyond. Love them or hate them, DAFs are on a dramatic growth trajectory that has people (i.e. donors) paying attention and wanting to learn more.
Why are these giving vehicles so popular, and how can nonprofit fundraisers leverage DAFs to amplify their fundraising results and community impact?
While there is no single correct answer, Jeremy R. Wells, CFRE, senior vice president of Philanthropic Services at the Saint Paul & Minnesota Foundation, provided strategies during his session “Demystifying and Leveraging Donor Advised Funds for Your Nonprofit,” at the AFP ICON 2025 conference in Seattle.
While there have been many opinions published about DAFs during the past decade, some meaningful data is available from the Donor Advised Fund Research Collaborative (https://bit.ly/4aT1Mfh), the National Philanthropic Trust (https://bit.ly/435uRCH), and others. This data helps illuminate who is using DAFs, how they are using them, and begins to point to how fundraisers might better approach their work with DAFs.
One aspect that hasn’t received enough attention is the potential DAFs have in leveraging non-cash assets to amplify more giving, said Wells. According to data from the U.S. Bureau of the Census, assets held in cash in the U.S. amount to only 8.3% of net worth (The Wealth of Households: 2020, Donald Hays and Briana Sullivan). Yet, cash continues to be one of the most common gift nonprofits ask for and receive.
One great example of unlocking more philanthropy via DAFs is through gifts of real estate. According to the same U.S. Bureau of the Census report, real estate makes up nearly 30% of household net worth and creates an enormous philanthropic opportunity. One big obstacle, however, is the reality that most fundraisers aren’t prepared to ask for, receive, or liquidate these more complex gifts. Another challenge is the fact that most people support multiple charities, and it is often difficult to consider ways to gift a tangible asset to multiple organizations.
Wells cited information from consultancy Ren in Indianapolis, Indiana, suggesting the average donor in the U.S. supports 4.5 nonprofits annually with affluent donors supporting as many as seven (https://bit.ly/4hqKN6x).
This is where DAFs come in. Not only are most DAF sponsors set up to receive and liquidate non-cash gifts, once they are liquidated, the donor advisors are then able to recommend grants to multiple nonprofits and causes the donor cares about. Think about the impact of an individual donor maybe giving $5,000 a year to each of their four favorite nonprofits. All of a sudden, they’re in a position to give them a five- or six-figure gift because they were able to leverage for charitable purposes the family cabin they no longer use.
It’s important not to downplay the complexity of many of these types of noncash assets, whether that be real estate or a privately-held business interest. It’s another reason why a strong partner, such as your local community foundation, can be such a valuable resource.
There are a number of items of which to be cognizant with gifts of real estate, such as:
* How to accept the gift (directly, via an LLC structure, etc.)
* The due diligence that needs to be done both from an organizational perspective but also a regulatory one based on your community;
* How the assets will be liquidated in a thoughtful manner balancing both expediency and profit; and,
* Keeping the donors informed throughout the process to create a joyful giving experience for them.
Unless you are doing a dozen or more of these sorts of gifts annually, it can be a difficult and cumbersome process without the right partner.
Here is one other word of note on gifts of real estate. There is often the temptation by some nonprofit leaders to consider holding a piece of real estate that might be revenue-generating, such as a small apartment building or commercial property.
While this is certainly an option, it’s important to remember that most nonprofit leaders do not have the wherewithal to become a real estate manager overnight. Not only is it a skill set that might not currently exist within the organization, but it also brings with it a meaningful amount of additional risk that could derail the organization’s charitable mission.
