What Are Donor Advised Funds? And Why You Should Care About The
A donor-advised fund (DAF) is a simple, tax-smart investment solution for charitable giving. Donors set up an online account and contribute cash, securities, or appreciated assets. Donors are eligible for a current-year tax deduction and can be more strategic about their giving decisions.
Episode 148 | What Are Donor Advised Funds? And Why You Should Care About Them
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🔦 NONPROFIT SPOTLIGHT 🙌🏿
Inland Empire Black Worker Center Pt. 4
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Speaker 1 (00:00):
Every nonprofit should have at least 10 streams of revenue, but most nonprofits are sleeping on this major source. It gives out over 52 billion in charitable funds. Want to know what it is? Join me in this episode and I'll tell you.
Speaker 2 (00:17):
You, welcome to On Air with Amber Wynn, where nonprofit leaders learn to fuse passion and commitment with proven business strategies to create long-term funding impact and sustainability. And now here's your host and resident Philanthrepreneur, Amber Wynn.
Speaker 1 (00:42):
Have you heard of donor advised funds? If you have not, then you are sleeping on one of the biggest taxed investments that the wealthy use to do their charitable giving. Over 2 million donor-advised funds are held for wealthy investors, philanthropists, people who understand that there is a tax advantage for having a donor-advised fund versus starting a brick and mortar nonprofit. So donor-advised funds are on the rise. They really increased during the pandemic and they're used by people who understand that in order to be business savvy, they're going to leverage their philanthropy. When we come back, I'm going to dive deeper into donor advised funds and why you should know all about them. Are you looking to leverage your 501(c)3 tax exempt status to get products and services donated for an event silent option or to support your program but aren't quite sure what to say? Get the donation request letters toolkit. It provides you with the templates you can customize to fit any request, eliminate the guesswork of what to say, how to say it, and what to offer potential donors as benefits for their donation. You had no idea you should offer donors something in exchange for their donation. Did you? Offering benefits triples your response rate. Plus the toolkit comes with the donor acknowledgement form template. It's the form you give them after they donate. This toolkit has everything you need for a successful donation request. Order your copy today.
(02:21):
Welcome back. Today we're talking about donor-advised funds. Donor-advised funds are a strategy that a lot of wealthy people use in order to save money, right? People think that philanthropy is all about heart and giving. It is, but when you understand how to use a donor advised fund as an opportunity to reduce up to 60% of your gross annual revenue, you understand that giving can also be a really good strategy for keeping more of your money. Think about it this way. When a business generates revenue, then the IRS is waiting to take 23% of that. When you donate to charity using a donor-advised fund, you get an immediate tax savings up to 60% of your annual gross income. Then you put that in your savings account, which is the donor advised funds. It grows interest, which allows you then to give more money to charity, and that is the strategy that wealthy people use.
(03:35):
Now, by law, a company, an individual, whoever has a donor-advised funds are only required to give out 5%. There's been a big push in the nonprofit sector asking Congress to push these investors to give out more money because you get the immediate tax break, but you don't have to give it out. This is why companies use donor-advised funds. They get to keep that money in their portfolio, they get to grow it, and then they get to use it when it benefits them. Say for example, you know that you're going to have an influx of revenue. You don't have to give out that money that year. You can wait to the year that you're going to get this influx in revenue, and then you get the tax breaks. That's how the wealthy used donor advised funds. As a nonprofit organization, you need to be trying to access those types of funds so that you can help increase the funding stream for your nonprofit.
(04:32):
How do you do that? Well, donor-advised funds are typically anonymous, but they're usually held at community foundations, right? So they're managed by community foundations, they're managed by wealth advisors. Our conversation today is how can you access more donor-advised funds? I'm going to recommend that you make it easier for individuals or corporations to donate using their donor-advised funds. How do you do that? You put a widget on your website. There are, when you invest with Fidelity or some of the other donor-advised funds that hold your money, they will give you a widget that you can put on your website so that people with donor-advised funds can easily donate. The other thing you want to do is when you are having fundraisers and you're promoting your organizations fundraisers, you want to say, Hey, and we accept money from donor-advised funds. Make it so where it's easy for these individuals who are giving out over 52 billion in charity to give to your organization.
(05:43):
So if you haven't heard about the donor-advised fund, you need to check it out as a nonprofit. If you are an entrepreneur, you need to check it out as a tax saving strategy. You can always check me out on my website. I have more information I can help get you set up with the donor-advised fund. If you're an entrepreneur and if you are a nonprofit, it's important that you start accessing this stream of revenue. All right, when we come back, ask Amber. It's when you get to ask me your most pressing question. When we come back, most founders don't realize that there are more applicants than there is money. This fact impacts a nonprofit's fundability. Nonprofit. Founders should administer research on their competitors, determine if their community is oversaturated, and identify their competitive advantage before they start a nonprofit. Check out how to validate your nonprofit idea, a step-by-step guide on how to administer the research you need to validate your idea before spending hundreds of hours and thousands of dollars only to struggle to fund it. Get your copy today and we're back, and now it's time in the episode where you get to ask me your most pressing nonprofit question. Today's question comes from Hobbes. Hey, Hobbes. Hobbes is asking about what's on a lot of nonprofits minds, what to do about this DEI situation,
Speaker 3 (07:12):
Hey, Amber. My name is Hobbes, Derek Hobbes, but everyone just calls me Hobbes. I'm reaching out to get your professional opinion about what's going on, specifically about the focus on DEI. I literally just started my program about 18 months ago to help young black men, you know, who don't have positive role models in their lives. I recruit professional black men from a variety of professional careers to mentor and form bonds with these young men so that they can see themselves in these career paths. I guess my question is, what do I do? I can't say the program is open to all races because it's not all races face this type of lack of representation in professional careers. Everybody is telling me, I can't say I focus on black youth because it's on a list of words or phrases you can't use. Yeah, I mean, what do I do?
Speaker 1 (08:00):
Okay, so I'm just going to keep it real you guys, because that's who I am, and I'm saying to you, Hobbes and every organization that specifically focuses on a culturally specific community, there is a reason that you are focusing on this culture. There is a reason why you're focusing on a particular race. It's because there is a need, right? Research has shown that there are disparities in communities where it's low resource, where economically it's challenged. And as Hobbes said, the reason why he started this organization 18 months ago is because young African-American men do not have a lot of representation of males in professional careers. So that's a reality. That is a truth. Do not change who you are. Do not change your mission. Do not start to change your organization to include populations that it doesn't impact. That's just going to dilute your impact funders.
(09:07):
Look at your outcomes, and if you can't demonstrate that you have been effective in changing your circumstance, then they're not going to fund you and Hobbs, here's what I have to say to you, and to those of you who are not really even in the position to qualify for federal funds, it does not apply to you, so don't focus on not trying to have these buzzwords that are going to bring attention to you like black or Latino or underrepresented or all of the other words that have been identified. Don't focus on that. You know what you need to focus on. You need to focus on making sure that your infrastructure is tight. You need to make sure that your compliance is 100%. You need to make sure that you have measurable goals and objectives, that you have a seasoned board, that your budget is tight because these are the things that funders are going to look at when they come to fund you.
(10:04):
Those organizations, those funding organizations that are being targeted by administration, they're going to continue to fund those organizations because there's a need. What they're going to make sure of is that your organization won't get them in trouble. What won't get them in trouble is that your compliance is tight, is that your infrastructure is tight. I said it and I'll say it again. When you're laying off all of these people and you're firing all of these people and you're taking away all of these resources, who's helping these people? It's the nonprofit sector, so the need isn't going away. What you're going to have to focus on is making sure that when it comes down to funders, selecting nonprofits to be funded is that your organization can withstand the scrutiny. The scrutiny is not on the language that you use. It's not even on the communities that you serve because these communities are going to need more support.
(11:00):
Just make sure that you focus on your infrastructure, making sure that you're compliance type and that you have the ability to show that you're making an impact. Thanks, Hobbes. Unfortunately, I'd like to say that you're the only nonprofit leader out there that's experiencing that, but we know that that's not the case. Thank you for the work that you're doing. Alright, so now we're going to move on to my favorite part of the show where we put a spotlight on nonprofits doing the work. One of those nonprofits, oddly enough, is an organization in the Inland Empire that focuses on black workers and their rights in the workplace, and if you think that they're not going through it, you better believe they do. They have black workers in the title, and guess what, as we wrap up this conversation with Dr. Thomas, he's talking about how when we support those people who are most marginalized, those people who are most at risk, we really shore up our communities. We really shore up our society because for those individuals who have less, we shore them up. It strengthens all of us, right? Anyways, I'm not going to get in my soapbox. Let's wrap up this last episode with Dr. Thomas from the Inland Empire Black Worker Center.
(12:29):
I want to thank you so much for taking time out of your day to just let my community know about what it is, the amazing work that you're doing in the Inland Empire. Is there anything else you'd like to say before we sign off?
Speaker 4 (12:44):
Sure. I want to say that you are amazing. We didn't talk about this, but I just want to take a moment to just share how helpful you have been to us because we were part of a program where you set for a number of weeks and you mentored us, me in particular, and talked about governance issues, talk about fundraising issues, the multiple streams and organization needs to be for sustainability. You talked about the legal and compliance issues. You talked about board governance and all of these things that are so helpful, the finances for us, and you shared in a culture way that we can understand and appreciate it. Also, it was in a way that's understandable. It was done in a way that is helpful and you were speaking through experience and wisdom, so I just want to celebrate you for a minute and thank you for being a part of our organizational lives and sowing into us.
Speaker 1 (13:51):
Aw, thank you, Dr. Thomas. I appreciate it. Having been an executive director and all the things, it's a challenge, and so I feel immensely honored to be a part of your journey and the organizations that I support, so thank you so much. I appreciate the acknowledgement. Always, always, always.
(14:27):
And we are back. That wraps up our conversation with Dr. Thomas. I know that I'm inspired by the work that he does in the Inland Empire. If you're interested, please be sure to check out the work that they're doing. Please be sure to fund the work that they're doing today. We've talked about donor advised, so please be sure to check out how to get more of those resources. It is a viable funding stream for nonprofits. This strategy is on the rise, so you want to just make sure that you are able to capitalize on the giving that's coming from this strategy. If you've heard anything today that you think is beneficial to your network, be sure to share. Be sure to subscribe, be sure to like, but most importantly, be sure to take care of yourself like you take care of your community. We'll see you next week.
