December again shattered the records for the number of donor-advised funds (DAF) established during the month at many DAF sponsors. Fortunately, many advisors read our September column in Financial Advisor, Talk With Clients Now About Charitable Plans And Avoid Year-End Stress,” and encouraged their clients to set up the funds earlier in the year, and many clients followed their advice. Others waited until the last possible minute and then pulled the trigger, causing a stampede of activity and stress upon the advisors, their associates and the clients themselves.

In December alone, one firm alone established 140 DAF accounts at American Endowment Foundation (AEF) among the many hundreds of other accounts opened by other advisors and their clients. Though nearly all donors who set up the funds had charitable intent, they rushed to do this to receive a tax deduction, to donate highly appreciated assets, and to frontload their charitable giving because of the new tax rules signed into law. Furthermore, advisors and donors increasingly recognize that having a new donor-advised fund account will simplify their charitable giving.  

However, establishing the donor-advised fund account is just one step. It may be natural for some donors and their advisors, especially after the year-end rush, to breathe a sigh of relief that they have received the tax deduction for 2017. Though the tax deduction is important, nearly all donors who made the decision to fund and create a DAF did so primarily because they have deep charitable intent.

So the next step is for the clients/donors, on their own or with their advisors, to determine what they should do at this point. Establishing a DAF account often enables donors to feel a greater sense of pride, satisfaction and accomplishment with their charitable giving both now and in the future.

Therefore, it would be very helpful for all clients with new DAF accounts, as well as for many who previously established ones, to do the following now:

1. Determine the goals of their charitable giving and develop a mission statement or statement of purpose.

2. Discuss whether they want to support many different causes and charities or just a small number.

3. Contemplate why charitable giving is important to them and whether leaving a charitable legacy is relevant.

4. Decide who will be involved now in the charitable giving process, and at what point children or other family members should be involved.

5. Clarify whether the DAF account should be for a limited time basis, should be continued after the death of the DAF creators, and if the latter, for how long after their death.

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