Donor-Advised Fund Succession Planning

Why succession planning matters

A donor-advised fund (DAF) is a powerful vehicle for charitable giving: you receive an immediate tax deduction when you contribute, the sponsoring organization holds and invests the assets, and you recommend grants to charities over time. But every DAF eventually faces a transition — the donor dies or becomes unable to advise. Succession planning answers the question: who will steward the fund and how will your wishes be carried out?

Succession planning matters because the sponsoring organization (the charity that holds the DAF) has legal control of the assets and final authority over distributions. While most sponsoring organizations honor donor intent, they are not legally bound to follow a donor’s directions precisely. That gap is why a clear, documented succession plan — coordinated with your fund agreement and estate documents — is essential to protect your philanthropic legacy. For further reading on how DAFs work and the sponsoring organization’s role, see FinHelp’s primer: Donor-Advised Funds: How They Work.

This article draws on practical client work and IRS guidance (see: IRS — Donor-Advised Funds). It is educational and not a substitute for legal or tax advice.

Who can serve as a successor, and what are common succession models?

Successors can be living individuals, committees, professional advisors, or charitable organizations. Common models include:

• Successor advisor(s): One or more named family members or friends who inherit the right to recommend grants. You can name primary and contingent successors.
• Committee or board: A family or advisory committee (sometimes formalized in a trust or family foundation) that makes collective recommendations.
• Professional steward: A philanthropic advisor, attorney, or financial institution named to manage the fund’s charitable strategy.
• Terminal designation (charitable beneficiary): You direct that, upon your death, the remaining DAF assets be distributed directly to one or more qualified charities. This effectively terminates further advisory privileges.

Each model has tradeoffs. Naming an individual keeps decision-making simple but risks future disagreements or capacity problems. A committee can preserve continuity but requires governance rules. Professional stewards bring expertise but add cost and remove some family control.

What the law and sponsoring organizations say

DAFs are gifts to a sponsoring public charity; donors retain advisory privileges but cannot enforce those instructions as binding directives. The IRS explains DAFs and related rules (see IRS page above). Important legal points:

• The sponsoring organization retains ultimate control over the assets and must ensure grants go to qualified public charities.
• Grants cannot provide prohibited private benefit to the donor, donor family, or related entities. Avoid recommending grants that would create impermissible benefits (e.g., tickets or naming rights that directly benefit the donor).
• Some sponsoring organizations allow naming successor advisors; others limit or prohibit certain successor designs. Check your fund agreement.

Because policies vary, the first step in succession planning is to request and review your sponsoring organization’s donor-advised fund agreement and succession policies.

Practical steps to build a durable DAF succession plan

1. Review your DAF agreement and sponsor policies

• Obtain the current fund agreement and any sponsor handbooks. Look for language on successor designation, termination, minimum balance rules, and transferability.

1. Decide your long-term objective

• Do you want the DAF to remain active across generations, or would you prefer the fund close and assets go to charities on a timetable? Clarify your intended time horizon and impact targets.

1. Name primary and contingent successors

• Use full legal names, relationships, and contact details. Consider naming alternates and a professional as backup.

1. Document philanthropic guidelines

• Create a one- to two-page Letter of Intent describing mission, preferred charities, geographic focus, grant size, vetting standards, and any prohibited uses. Keep this separate from the fund agreement but provide it to the sponsor and successors.

1. Coordinate with estate planning documents

• Reference the DAF in your will or trust to avoid ambiguity and to direct residual distributions if the fund agreement permits.

1. Formalize governance for multi-person successors

• If a committee will advise the fund, set decision rules (majority vote, quorum), meeting cadence, and conflict-of-interest policies.

1. Educate and onboard successors

• Hold at least one formal meeting and provide written materials on due diligence, the sponsor’s grant process, and reporting standards.

1. Review periodically

• Revisit the plan after major life events (marriage, divorce, births, deaths) or every 3–5 years.

Example successor language (template)

Include this as part of your DAF paperwork or estate plan after review by counsel and the sponsor:

“I designate [Name, DOB, SSN last 4 digits or other ID] as successor advisor to my donor-advised fund [Fund Name or Account Number] held at [Sponsoring Organization]. If [Name] is unable or unwilling to serve, I designate [Alternate Name] as successor. If no successor is able to serve, I direct that the fund assets be distributed to [Charity A (EIN), Charity B (EIN)] per the sponsoring organization’s transfer policies.”

Note: Sponsoring organizations may require their own successor designation form. Always confirm acceptable wording with them.

Tax and compliance considerations

• Timing of tax deduction: Your charitable income tax deduction occurs when you donate to the DAF, not when the DAF makes grants. Successors recommending grants have no additional income tax event from making grants to qualified charities.
• No private benefit: Successors must not recommend grants that provide impermissible benefits to disqualified persons (the donor, certain family members, or related entities). See IRS guidance on donor-advised funds.
• Transferability and minimums: Sponsors often impose minimums for continued accounts or for transfers between sponsors; these financial constraints should inform your plan.

For a plain-English overview of DAF rules from the IRS, visit: https://www.irs.gov/charities-non-profits/charitable-contributions/donor-advised-funds

Governance and family dynamics

Succession planning is as much about relationships as paperwork. In my 15 years advising families, I’ve seen these recurring best practices:

• Start conversations early and align on values before naming successors.
• Use education as succession planning: invite potential successors to participate in vetting charities and understanding impact metrics.
• Consider phased transitions: gradually expand successors’ advisory role during your lifetime so they gain experience.
• Document dispute-resolution mechanisms (mediation clauses or independent arbiter) to reduce family conflict.

Common mistakes and how to avoid them

• Mistake: Assuming the sponsor will follow undocumented wishes. Fix: Provide a written Letter of Intent and formal successor designation.
• Mistake: Naming successors without preparing them. Fix: Train successors, share due-diligence checklists, and involve them in decisions while you’re alive.
• Mistake: Neglecting sponsor policy differences. Fix: Request policy documents and confirm successor acceptance procedures.

Quick implementation checklist

• [ ] Pull fund agreement and sponsor succession rules.
• [ ] Decide whether to keep the fund active, transfer, or terminate at death.
• [ ] Name primary and contingent successors in writing.
• [ ] Draft a concise Letter of Intent with mission and vetting standards.
• [ ] Coordinate language with your estate plan and attorney.
• [ ] Onboard successors and schedule regular reviews.

Where to get help

• Talk to your DAF sponsoring organization first — they can explain successor forms, required signatures, and any limits.
• Work with an estate planning attorney to align DAF instructions with your will or trust.
• Consider a philanthropic advisor for governance design or a family philanthropy facilitator to lead succession conversations.

For practical day-to-day guides on managing a DAF and reporting expectations, see FinHelp’s related posts: Donor-Advised Fund Reporting and Best Practices and Maximizing Impact with Donor-Advised Accounts.

Professional disclaimer

This article is educational and reflects general principles and practical experience; it is not legal, tax, or investment advice. Rules and sponsor policies can change. Consult your sponsoring organization, estate attorney, and tax advisor before finalizing succession instructions for a donor-advised fund.

Authoritative sources

• IRS — Donor-Advised Funds: https://www.irs.gov/charities-non-profits/charitable-contributions/donor-advised-funds
• FinHelp resources: Donor-Advised Funds: How They Work, Donor-Advised Fund Reporting and Best Practices