Can You Transfer a Donor Advised Fund to Another?

A Donor Advised Fund (DAF) serves as a charitable giving vehicle, allowing individuals to make a charitable contribution and receive an immediate income tax deduction. These funds are administered by a sponsoring public charity, such as a community foundation or a financial institution’s charitable arm. It is generally possible to move charitable assets from one DAF to another DAF established with a different sponsoring organization.

Nature of Donor Advised Fund Transfers

Transferring funds between Donor Advised Funds does not involve a direct account transfer in the way one might move money between personal bank accounts. Instead, it is a process where the original DAF’s sponsoring organization issues a grant from your existing fund to the new DAF’s sponsoring organization. This mechanism is possible because both organizations are qualified public charities under IRS Section 501(c)(3).

The assets held within a DAF are irrevocably committed to charity once contributed, meaning the donor no longer retains legal ownership. Therefore, the “transfer” is essentially a grant recommendation from the donor to their current sponsoring organization, directing them to disburse funds to another charitable entity, which in this case is the recipient DAF’s sponsoring organization. The original sponsoring organization handles the liquidation of assets within the DAF and forwards the proceeds as a charitable grant.

Situations Leading to a DAF Transfer

Individuals or families often consider transferring DAF assets for various reasons, including:

• Seeking different investment strategies or options.
• Reducing administrative fees.
• Consolidating multiple DAF accounts for simplified management.
• Aligning with a sponsoring organization that offers a more specific charitable focus or mission.
• Desiring more personalized service, advanced online tools, or financial advisor management.

Steps for Transferring DAF Assets

Initiating a DAF asset transfer typically begins with establishing a new Donor Advised Fund at the chosen recipient sponsoring organization. This involves completing their application process and providing necessary identification details. Once the new DAF account is established, the donor can proceed with the transfer request.

The next step involves contacting the original DAF’s sponsoring organization to request a grant distribution from the existing fund. Donors generally use the standard grant request forms provided by their current DAF provider. It is necessary to specify the recipient as the new DAF’s sponsoring organization, including its legal name and Employer Identification Number (EIN) or Tax ID.

The grant request should also clearly indicate that the funds are intended to be deposited into the donor’s newly opened DAF account at the recipient organization. After the original sponsoring organization processes the request, liquidates the assets, and issues the grant, the funds are sent to the new sponsoring organization. The new organization then deposits the funds into the donor’s designated DAF account, completing the transfer.

Financial and Administrative Aspects of DAF Transfers

Transferring Donor Advised Fund assets involves several financial and administrative considerations. Fees can include annual administrative charges, which are typically a percentage of the assets under management and might range from approximately 0.20% to 1.5% or more, often with tiered structures where larger balances incur lower percentages. Some providers may also have investment management fees or transaction fees associated with liquidating assets for the transfer.

Minimum transfer amounts can vary, though some providers allow transfers as low as $100 or $500, while others may require initial contributions of $10,000 or $25,000 to open a new DAF. The timeline for a DAF transfer can range from a few weeks to several months, depending on the type of assets being transferred and the processing times of both sponsoring organizations. Simple cash or publicly traded securities might transfer faster, typically within a few business days to a few weeks, while complex assets can take 6-8 weeks or longer.

From a tax perspective, transferring funds between DAFs is generally not a taxable event for the donor. The tax deduction was already realized when the original contribution was made to the first DAF, and since the assets remain irrevocably committed to charity, no new deduction is generated. Donors should conduct due diligence on the new sponsoring organization, reviewing their investment options, fee schedules, and policies to ensure they align with their charitable objectives.