Best Practices: Entering constituent records for donor-advised fund gifts
In this article:
- Donor-advised funds (DAFs): What are they and how do they work?
- Create a constituent record for each DAF, create a reciprocal relationship to it from the donor recommending the grant, and set up soft credits based on relationship type
- Set up your DAF acknowledgment templates
- Enter the DAF gift and soft credit
- Send out the DAF acknowledgments
Donor-advised funds (DAFs): What are they and how do they work?
If you are not sure what donor-advised funds (DAFs) are or how they work, we recommend reviewing this article provided by the Nonprofit Law Blog:
A simple example is a fictitious donor named Jane Doe, who possesses some wealth. After consultation with her advisors, Jane transfers $100,000 to the Doe Family Donor Advised Fund, managed by Fidelity. Jane’s tax deduction comes at the moment she loses control of the $100,000 and transfers it to the nonprofit entity that is the Doe Family DAF. Periodically, Jane will recommend grants be distributed from the Doe Family DAF. Personnel at Fidelity will then review that recommendation and, if an organization qualifies for distribution, distribute grants in line with Jane’s recommendations.
For illustrative purposes, this article assumes that Jane Doe is a constituent of the Town Historical Society organization. She has given small gifts regularly but has decided to recommend a $5,000 grant from her DAF this year.
To manage this scenario in LGL for Jane Doe, follow the instructions provided in the article sections below.
Create a constituent record for each DAF, create a reciprocal relationship to it from the donor recommending the grant, and set up automatic soft credits based on relationship type
The first step is to set up a constituent in LGL. We recommend entering the Doe Family DAF as the constituent. We don’t recommend entering a constituent for “Fidelity” because it is the “Doe Family Donor Advised Fund” that is making the grant in an official capacity, rather than Fidelity, which is only administering it.
Set up the DAF as a constituent and create a relationship to Jane Doe from that DAF. Steps to take in LGL are shown in the screenshots below.
NOTE: The screenshots show that Jane Doe has been donating by credit card or check prior to recommending a $5,000 grant from the Doe Family DAF.
- Set up the constituent record:
- Create the reciprocal relationship. First add the relationships "DAF" and "DAF-Donor" to your list of relationships and set them to be reciprocal. Enter the data as shown below:
- Code the DAF to “Contact type = Other” and to a group called "DAF". This will separate the DAF constituents from other constituents easily and keep them out of mailings to primary contact types:
If you have not done so already, you can then set up automatic soft crediting based on relationship type. This will simplify data entry when the grant comes in from the Doe Family DAF (as well as any other DAF you set up with a relationship to the DAF donor[s]).
Set up your DAF acknowledgment templates
Before entering the gifts, set up the acknowledgment templates. Two acknowledgment templates will be needed in this case:
- An acknowledgment template to be sent to Fidelity (and other DAF management companies) to confirm the grant was received. The below template was named "DAF Receipt Ltr" and created in MS Word with no text in the Letter Content tab in LGL:
- An acknowledgment template to be sent to Jane Doe (and other donors who recommend grants from their DAFs) thanking her for recommending a grant from the Doe Family DAF. The below template was named "DAF Thank You - Soft Credit" and created in MS Word with no text in the Letter Content tab in LGL:
Enter the DAF gift and soft credit
Once the acknowledgments templates have been created, you can enter the DAF gift and soft credit.
- Enter the gift from the Doe Family DAF, as shown here:
- In the Select acknowledgment template section of the gift, choose the “DAF Receipt Ltr” template, as shown here:
- In the Related gifts area of the gift, you will see the auto soft credit setting that was previously set up with Jane Doe as the soft credit recipient. Once you add in the soft credit amount in the Amount field, you can choose the “DAF Thank You - Soft Credit” template, as shown here:
Send out the DAF acknowledgments
Once you have saved the DAF gift, two acknowledgments will be generated in LGL, one for the gift itself and one for the soft credit.
The Word documents, after merge, will look like the below:
DAF Receipt Ltr:
DAF Thank You - Soft Credit letter:
You can then send out these acknowledgments as you normally would.