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Tab 26: Guidelines for Donor Advisors and/or Sample Donor Advised Fund Agreement

Donor advised fund guidelines contain a complete description of all related activities that affect donor advised funds. These include communicating with donor advisors, restrictions on donor advised funds and donor activities, and processes related to donor recommendations and naming successors.

Material Changes: For the purposes of reconfirmation, a material change is any change that affects any of the
key elements.

For more information, review Core materials, FAQs and a glossary of important terms

Related Standards

IV. Stewardship and Accountability
IV.E A community foundation maintains a balance between donor involvement and governing board control and complies with all applicable laws and regulations.

View all National Standards

Key Elements

A process for communicating with donors about limits on their authority and about board control

A description of the role of the board in advised fund distributions

Prohibition against donors, advisors, or related parties using advised funds to fulfill pledges

Prohibition against donors, advisors, or related parties using advised funds to secure benefits from the distribution recipient (The prohibition should extend to prevent, at minimum, donors, advisors and related parties from receiving benefits)

Prohibition against grants to individuals from funds legally defined as donor advised funds. This includes checks written directly to an individual or checks written to an entity for the benefit of a specified individual.

Prohibition against donors, advisors, or related parties receiving grants, loans, compensation, or similar payments from donor advised funds

A process for acting on donor recommendations

Policies regarding naming successors to provide donor recommendations

Policies regarding whether principal and/or interest can be distributed

Core Materials
FAQs
Glossary

Required Documents

Guidelines for Donor Advised Funds
Sample Donor Advised Fund Agreement

Please explain the prohibitions on donor advised funds.

According to the Pension Protection Act, all donors, advisors, or related parties should not receive more than incidental benefits from donor advised fund distributions. Your donor advised fund documentation should include a prohibition against the funds being used to fulfill pledges and/or secure benefits from the distribution recipient. At minimum, the prohibition should extend to prevent donors, advisors, and related parties from receiving benefits.

The Pension Protection Act also prohibits grants to individuals from donor advised funds, so make certain that your donor advised fund documentation includes a prohibition against any grants to individuals from funds legally defined as donor advised funds. This includes checks written directly to an individual or checks written to an entity (such as a university) for the benefit of a specified individual.

Take steps to ensure that the foundation's donor advisors are aware of the balance between their involvement, and the foundation's board's authority, in regard to donor advised funds.

Donor advised funds
A fund may be classified as donor advised if it has at least three characteristics: (1) a donor or person appointed or designated by the donor has, or reasonably expects to have, advisory privileges with respect to the fund's distributions or investments, (2) the fund is separately identified by reference to contributions of the donor(s), and (3) the fund is owned and controlled by a sponsoring organization, such as a community foundation. A fund possessing these characteristics may be exempt from the donor advised fund classification if it grants to one single public charity or government unit or if the fund meets certain requirements applicable to scholarship funds.

Expense reimbursement
Payment for incurred expenses.

Gifts
The term used to describe an asset contributed by a donor to a fund. This could be cash, appreciated stock, real estate, etc.

Grants
The award of funds for charitable purposes.

Interest
a fixed charge for borrowing money; usually a percentage of the amount borrowed.

Pension Protection Act
The Pension Protection Act of 2006 was signed into law on August 17, 2006. Among its many provisions, it legally defined and regulated donor advised funds for the first time.

Pledge
A promise to make future contributions to an organization.

Principal
The dollar value of an asset. When used in relation to an endowment, it means the sum of the dollar values of all gifts to the endowment using the dollar value of each gift on the day the gift was completed.

Reconfirming?

Review all key elements and consider if your organization has made changes to your policies, powers or practices.

Pay special attention to key elements and core materials marked with and a . These represent minimum requirements for reconfirmation as well as Pension Protection Act requirements. Items marked with a are particularly critical for those who submitted record books prior to January 2007.