Fund Your Client’s Future Giving with a Legacy FundSubmitted by American Endowment Foundation on December 15th, 2023
There are a variety of reasons a donor may want to delay funding a donor-advised fund (DAF) Whether they’re preparing for a future occurrence or hoping to engage their young children or grandchildren, a Legacy Fund at AEF may be a good option to consider.
A Legacy Fund is a type of DAF that receives a charitable donation long after the account is established. Legacy funds typically are funded after the death of the establishing donor or years later during the donor’s lifetime. Legacy funds are not to be confused with placeholder funds, which are funded within months of the account's creation. (Placeholder Funds are often used when donors or advisors, wishing to avoid the year-end scramble, plan to fund the account during the year but aren’t sure how much or which assets they will donate.)
Legacy Funds may be a good solution when the donor:
- Wants to name the DAF an IRA beneficiary
- Is unsure how much they need to live on and wants to avoid donating too much during their lifetime
- Wants to actively engage their heirs in charitable planning with funding coming later
- Wishes to avoid recognition or doesn’t want others to know of their wealth during their lifetime
- Wants to support several charities after their death by leaving a disposition plan for their charitable assets
- Desires full flexibility without fees in case their estate plan changes
- Expects to terminate their private foundation upon their death, offering heirs the simplicity of the DAF versus the administration of the complex foundation
Advisors leverage Legacy Funds to:
- Subtly encourage asset-rich clients to start thinking about giving to charity
- Create a bridge to the next generation of the client’s family
- Continue managing their clients’ charitable assets after the client’s death
- Offer a simple, streamlined way for clients to have charitable impact
A Legacy Fund can accept many different types of assets, including cash, securities, real estate or a life insurance policy. When a Legacy Fund is part of an estate plan, assets can be transferred via bequest. However, some donors expecting to fund their Legacy Fund at death instead decide to fund it during their lifetime. This enables them to experience their impact while they’re alive, engage heirs in charitable activities and receive recognition and appreciation from the charities they support during their lifetime.
Opening a Legacy Fund is easy. Advisors should complete a DAF application on AEF’s Partner Gateway checking “Legacy Fund” as part of the process. Then, advisors can contribute assets to it when the client is ready: Fees are not assessed until the account is funded.
Whether the account will be funded during the client’s lifetime or after their death, AEF should be notified in advance that funding is forthcoming. Once the Legacy Fund is created, advisors should periodically confirm that their client’s succession or disposition plans and contact information remain the same; if anything changes, simply reach out to AEF.
For more information about donor-advised funds or future giving, please contact us or call 1-888-966-8170 with any questions.