In our article, about “bunching” Charitable Gifts Using Donor Advised Funds, we provided some insight into donor advised funds. We also listed some of the many benefits that the charitably-minded could garner from using donor advised funds as a component of their charitable gifting strategy.  As a follow up to that article, we wanted to provide some information that could be helpful when vetting custodians who offer donor advised funds.

It is important to remember that just about every mutual fund company and brokerage firm offers a donor advised fund platform, so this is by no means a comprehensive list.  Be sure to check with your preferred custodian, as we have discovered that it is much more convenient to transfer appreciated stock or mutual fund shares among accounts at the same custodian.

The following table lists attributes from each vendor that may help you decide which donor advised fund works best given your preferences and giving expectations:

Which Charities Can Receive "Grants" (or gifts) From Donor Advised Funds? Any charity that is considered a 501(c)(3) organization is eligible to receive a grant.  These include most relief organizations (local and national), universities and religious organizations.  A good resource to use to research 501(c)(3) organizations is GuideStar.org.  Just because your charity of choice is not listed on the GuideStar website, does not mean that it is not eligible to receive a grant from your donor advised fund.  However, you should check with the custodian to make sure that your favorite charities are eligible to receive grants.

What investment alternatives are available in donor advised funds through each custodian? Each custodian has a slightly different take on the investment alternatives on their platform.  At lower gift levels (donor advised funds valued at less than $250,000), there is normally a limited menu of investment options.  However, most platforms have both actively managed and passive investment alternatives.

Does Beacon Financial Strategies manage donor advised funds for clients? No.  Beacon considers it a great privilege to assist clients in their charitable gifting strategy, but does not directly manage the investments held in a donor advised fund.

Are there major differences between each custodian that should be considered? Other than the items listed in the table above, each custodian has a number of subtle differences that may be important to you.  For example, one custodian allows the owner of the donor advised fund to send an "eGift."  This eGift is simply an invitation that allows family members, friends, colleagues, etc. to make a grant recommendation from your donor advised fund to the charity of their choice.