Happy DAF Day! Donor-advised funds are best known for making it easy to set aside money for charitable giving and recommend grants that have an immediate impact. But without a succession plan, many of these accounts become “orphaned” at a donor’s passing, leaving their charitable intentions incomplete. By guiding donors through succession planning, you can help them turn their DAF into a lasting legacy.
The Importance of DAF Succession Plans
Donors don’t retain ownership over the funds they contribute to a DAF. Instead, they have advisory privileges to recommend how grants are distributed—privileges that expire upon the donor’s passing. Without a succession plan, the sponsoring organization distributes the remaining assets in accordance with its policies. Typically, this means that the funds are allocated to the organization’s general charitable initiatives or preselected charities. With a succession plan, the donor can ensure that their charitable intentions are fulfilled in a way that continues to reflect their values and preferences.
Succession planning becomes even more critical when we consider that there are currently no annual distribution requirements. It’s quite possible that a significant amount will be distributed after the donor’s death. A succession plan can allow that growth to continue, creating a long-term giving vehicle for multigenerational philanthropy.
Why Succession Planning Matters: The Scale of DAF Giving
According to the National Philanthropic Trust’s 2024 Donor-Advised Fund Report:
• U.S. DAFs hold an estimated $251.52 billion in assets.
• The average DAF holds about $141,120.
• Qualified charities received $54.77 billion in grants from DAFs in 2023.
Succession Planning Options
When you talk to donors about creating a succession plan, make sure they know they have some flexibility when it comes to shaping their DAF’s future. They can:
• Designate a charitable beneficiary. The donor selects one or more charities to receive the remaining balance in a lump sum—a simple way to complete philanthropic goals.
• Name successor advisors. The donor selects one or more individuals (family members, trusted friends, or other loved ones) to step into the advisory role, recommending grants that uphold the donor’s clearly stated charitable intentions and continue their legacy.
• Establish an endowment approach. The donor directs that the remaining balance be used to create a permanent fund. Like an endowment, the principal stays invested and generates annual payouts (usually a set percentage of earnings) to create a perpetual impact with an organization.
• Create a hybrid plan. The donor combines options to align with their goals. For example, the donor might distribute a portion as a lump sum and name a successor advisor for the remaining portion. Or the donor might divide the DAF into separate DAF accounts, each with its own successor advisor. This approach balances added complexity with significant flexibility and personalization.
Steps to a Successful Succession Plan
By engaging donors in conversations about DAF succession plans, you’re providing practical guidance that can inspire them to include your organization in their plans. When entering into these discussions, keep the following in mind:
1. Start the conversation early. Many donors remain unaware that DAFs can be orphaned without a succession plan in place. These donors need time to thoughtfully consider important decisions related to succession planning and include family members in these choices.
2. Discuss philanthropic intentions and legacy goals. Frame the discussion as an opportunity for the donor to carry their values forward. Ask questions like:
• Do you want your loved ones involved in your DAF after your lifetime?
• Are there causes or organizations that you would like to support beyond your lifetime?
• If you name a successor, how much direction or flexibility do you want that person to have?
• Do you want to make a lump-sum distribution or recurring annual grants?
3. Encourage donors to take action. Donors who understand the need for succession planning are likely to move forward, but there are certainly ways you can help make that happen:
• Provide examples of how other donors structured DAF succession plans.
• Encourage family conversations to communicate charitable priorities and ensure unity in decision-making.
• Facilitate connections with advisors to create a succession plan that aligns with the donor’s overall estate plans and goals.
• State clearly that you hope your organization can be part of their DAF succession plan.
• Offer additional resources and guidance.
DAFs already play a major role in American philanthropy. By helping donors plan for what happens next, you ensure that their generosity continues—strengthening your mission and honoring the values that matter most to them.
