In meaningful memory: Donor advised funds as living legacies

Even though it’s likely you’ve never heard his name, Ephraim Huit is tangible evidence of the human drive to remember those we lose.

Just off the Connecticut Freedom Trail in the town of Windsor, you’ll find Palisado Cemetery. Inside, past scattered trees and rows of carved rock, sits a sandstone monument erected in 1644: Ephraim’s grave marker.

It’s no great pyramid or gilded tomb, but it carries the same essential energy. Thought to be the oldest legible headstone in the United States, it has done the work all memorials aspire to: kept Ephraim’s name alive.

More than 380 years later, we are still marking space for people we love, but how we remember them has evolved beyond just plots and stone. Giving – in ways that honor a person’s life and passions – has become a central element of remembrance.

“It’s one of the first things people want to do,” says Nicole Hisler, president of Raymond James Charitable, “to make some good out of the loss.”

Memorial organizations number in the thousands, typically in the form of public charities and private foundations. More recently, another option is gaining prominence: donor advised funds (DAFs). DAFs are tax-efficient vehicles that operate something like a charitable savings account. Their appeal in this context lies in their simplicity, offering a straightforward way to keep the names, the passions and the legacies of those we love alive. 

Ease in the hardest time

Grief is often described as a fog because of the way it occupies space. It’s a consuming force that colors every aspect of life in the immediate aftermath of loss. While the intensive and sometimes tedious work of creating a new charitable organization can be exactly what some people need to help them cope, it can be struggle for others to manage, no matter how intent they are on honoring someone.

This is part of why DAFs are proving to be such useful memorial tools.

Opening one is as simple as finding a sponsoring organization – a registered public charity that manages and administers these accounts – then completing an application, setting investment and administrative preferences, and making a minimum contribution of cash or other qualified assets.

Sometimes in as little as one day, a donor can establish an account and begin making grant recommendations.

While there are stipulations, for instance, DAFs can only make gifts to 501(c)(3) organizations, donor advised funds aren’t subject to the same distribution requirements as private foundations and public charities, nor do they entail the same administrative lift.

In addition, the tax advantages of these accounts can help maximize the impact of donations. Owners can take deductions on their contributions, and funds in a DAF grow tax-free.

According to Nicole, “It’s an easy way to honor someone, while offering the account owner time to decide how that giving could evolve.”

Flexible philanthropy

Along with simplicity, another key to DAFs’ appeal, especially in the context of honoring a life, is their flexibility. There are no minimum annual distribution requirements. That means account owners don’t have to make decisions about how, when or where to distribute funds before they’re ready, offering them something that can feel scarce when processing a tragedy: time.

The DAF approach actually helps optimize time in two directions. Because they can be set up so quickly, DAFs serve as ready receptacles for the outpouring of support that comes in the days and weeks following a loss. Then, without the pressure to make gifts by a deadline, the funds stay invested until they can be used purposefully and effectively.

Additionally, like other memorial vehicles, DAFs can accept third-party contributions, making it easy for individuals, trusts or even other charitable organizations to make gifts. A growing number of DAF sponsors have also adapted to our increasingly digital world, supporting online donations via credit card and even creating QR codes for display at events and gatherings. 

A first step or a lasting legacy

While DAFs are robust enough to serve the long-term needs of those who want to make an ongoing charitable impact in memory of a loved one, they can also be a precursor to something bigger.

Opening a DAF doesn’t preclude the future creation of a public charity. Should an owner reach a point where they want to expand their oversight or the scope of their charitable efforts, they can close the DAF and use the funds to launch a 501(c)(3).

There’s also the option to tap into the power of multiple vehicles. For example, a DAF can be used to support several core causes alongside a public charity that is narrowly focused on one. Keep in mind that owners cannot contribute DAF funds to charities from which they draw a salary.

Ultimately, the process of giving in a loved one’s honor will be as unique as the grieving process itself. But whether it is the solution or simply a starting point, Nicole emphasizes the relief a donor advised fund can deliver in the most difficult times.

“If there’s an idea for how to honor someone, this helps you get moving, without the administrative burden, without the time to get approvals, and without the pressure to have a clear purpose or mission when you’re still in the midst of that grief.”

Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a donor advised fund for federal and state tax purposes. To learn more about the potential risks and benefits of donor advised funds, please contact your financial advisor.

Raymond James Charitable is the brand name for the Raymond James Charitable Endowment Fund, an independent non-profit organization with a donor advised fund program.