These Donor-Advised Fund Program Terms and Conditions (the “DAF Terms”) cover the following information related to the American Brain Foundation (“ABF”) donor-advised fund (“DAF”) program:
- Establishing a DAF
- Investment management of resources in DAFs
- The process and ground rules for recommending grants from DAFs
- Grant processing and distribution
- Program fees associated with DAFs
- Reporting and accessibility of information for donors
DAFs created under the DAF Terms are subject to the DAF Terms, which may be amended from time to time.
II. Establishing a DAF with ABF
A. Contributions: A donor (the “Donor”) must make an initial contribution of at least $5,000 to establish a DAF with ABF (the “Initial Contribution”). After the Initial Contribution, the Donor or anyone else may make additional contributions in any amount, at any time to a DAF. All contributions are irrevocable once accepted.
Generally, Donors can make initial and subsequent contributions in a number of forms, including cash, publicly-traded securities, other types of property (e.g., illiquid assets and gifts in kind), and deferred giving through estate planning. DAF 2 contributions are generally accepted and processed in accordance with ABF’s Gift Acceptance and Recognition Policies.
Once an Initial Contribution is made, the Advisor (see below) may begin making grant recommendations. However, a DAF must maintain a minimum balance of $1,000 in order to continue making grant recommendations (the “Minimum Balance”). In the event a DAF drops below the Minimum Balance, the DAF will be subject to the Dormancy Rule described in Section IV below.
B. Name the Fund: Donors need to choose a name for their DAFs. Donor may submit one or more DAF names to ABF in connection with their Initial Contribution. ABF shall have the right to final approval of DAF names, and shall work with Donors to come up with acceptable names in the event no names submitted in connection with the Initial Contribution are acceptable.
C. Appoint Advisor: Advisors are individuals with the ability to submit grant recommendations (“Advisors”). Advisors may not be minors. Only one Advisor is permitted with respect to a DAF at a given time. Upon making the Initial Contribution, Donor will need to identify an individual to serve as the Donor’s authorized Advisor who will have the ability to submit grant recommendations for the DAF (“Initial Advisor”). The Initial Advisor will typically be, but need not always be, the Donor.
D. Designate Successor Advisor(s): Successor advisors take responsibility for the DAF upon the death, legal incompetence or resignation of the previous Advisor (each, a “Successor Advisor”). The Donor may select a maximum of two (2) “generations” of Successor Advisors, which generations shall each consist of a single Successor Advis The Donor must name Successor Advisors during his or her lifetime. Donors may not name Successor Advisors through a testamentary instrument, including through their will or instruction to an executor, and may not name their estate as a Successor Advisor.
Upon the death, legal incompetence or resignation of a Successor Advisor in a generation, responsibility for the fund will pass to the next generation Successor Advisor, if any. The designated Successor Advisor must provide ABF with written notification and proof of the last Donor Advisor’s death or legal incompetence.
Upon the death, legal incompetence, or resignation of the last Successor Advisor in the last generation or if no Successor Advisor is named at any generation, the balance of the DAF will be transferred to the ABF Fund.
Upon the death or legal incompetence of the Initial Advisor, 50% of the amount left in the DAF (or more at the wish of the Initial Advisor), will be transferred to the general fund of ABF (the “ABF Fund”); provided, however, in the sole discretion of the ABF, none of the balance will be transferred to the ABF Fund and the first generation of Successor Advisors may make recommendations for 100% of the amount in the DAF.
Upon the death or legal incompetence of the first generation Successor Advisor, 50% of the balance of the DAF, (or more at the wish of the Successor Advisor), will be transferred to the ABF Fund.
E. Special Rule for Group DAFs: An organization may create a DAF with ABF of perpetual duration (i.e., not limited to the life of two (2) generations of Successor Advisors) provided that the organization continues to exist and the DAF remains above the Minimum Balance (a “Group DAF”). However, a Group DAF must be a restricted fund where grant recommendations are automatic and recurring at regular intervals to a specific organization (or multiple organizations). The organization may make changes to its automatic payment recommendations a maximum of once every five (5) years through a single appointed Advisor who the organization may choose and change at its discretion.
F. Special Rule for Endowed DAF: In order to create an endowed DAF, there must be an Initial Contribution of at least $100,000. Furthermore, endowed DAFs will be required to comply with spending policies applicable to other endowed funds at ABF.
G. Investment: See Section III below.
III. Investment Management
To enhance efficiency and reduce the cost of operations, contributions to a DAF are pooled with donations from other sources for investment management and administration purposes. Investments will be made at ABF’s sole discretion. Donors should be mindful that investment markets are subject to volatility and possibly significant performance fluctuations. All investments are subject to market risk, including the possible loss of principal. Past performance is no guarantee of future results.
IV. Recommending Grants
Advisors may recommend grants to Qualified Charities (see below).
Before processing any grant, ABF or its designee reviews each recommendation to verify compliance with and ABF policies and IRS guidelines, including seeking clarification when there is a chance that an Advisor may receive a personal benefit, and in order to ensure that recipient organizations are aligned with ABF’s charitable mission.
To expedite the review and processing of grant recommendations, the following applies:
Grant Minimum: The minimum grant amount a Donor can recommend is five hundred dollars ($500). If the amount of a grant recommendation will bring a DAF below the Minimum Balance Amount, the Advisor will be asked whether they want to recommend a grant in a different amount or to make an additional contribution to the DAF in order maintain the ability to make future grant recommendations.
Timing and Number of Grants; Dormancy Rule: Grants will be made on a quarterly basis by ABF on the first day of each calendar quarter (e.g., Q2 grants made April 1) unless such day falls on a weekend or federal holiday, in which case grants will be made the next business day (the “Grant Distribution Day”). Grants must be recommended at least thirty (30) days prior to the next Grant Distribution Day in order to be processed and made on that Grant Distribution Day. Donors may recommend a maximum of ten (10) grants to be made on a given Grant Distribution Day.
It is important to note that after three (3) years of inactivity (i.e., no grant recommendations), the DAF will be closed and the balance of a DAF will be transferred to the ABF Fund (the “Dormancy Rule”). The transfer to the ABF Fund as a result of the Dormancy Rule is irrevocable, and it is the sole responsibility of Advisors to ensure sufficient activity to prevent the transfer as a result of the Dormancy Rule. However, prior to closing an account, reasonable efforts will be made to contact the Advisor and request that grants be recommended from the DAF.
Recurring Grants: An Advisor may recommend that a grant be made to a charity on a recurring basis (e.g., quarterly, semi-annually, annually). Please note that recurring grants may be discontinued due to insufficient funds, a change in status of the charity, or if an Advisor suspends the grant.
Donor Recognition or Anonymity: When recommending a grant, an Advisor may choose a number of ways for the grant to be recognized, including: (i) DAF name only; (ii) Donor’s name and DAF name; (iii) in honor of or in memory of someone; or (iv) anonymous. If an Advisor chooses anonymity, ABF will not release the identifying information specific the Donor or DAF to the recipient charity.
Qualified Charities: ABF always recommends as a priority that grants, or at least a portion of grants for a given Grant Distribution Day, be made to ABF to support ABF’s charitable mission. However, grants can also be made to governmental units or to organizations that are described in Section 501(c)(3) and Section 170(b)(1)(a) of the Internal Revenue Code (the “Code”) which have complied with the United States Patriot Act by submitting the proper documentation to ABF. Some limits apply to grants to supporting organizations as described in Section 509(a)(3) of the Code. Grants may also be made in certain situations to foreign charities and other non-501(c)(3) organizations upon verification of their nonprofit status and purpose by ABF. ABF will only make grants in the event ABF decides, in its sole discretion, the grants are being made to organizations aligned with ABF’s charitable mission. ABF will notify an Advisor in the event it determines a recommended grant does not identify a Qualified Charity.
Ineligible Grants: Grants may not be made directly to individuals (including scholarships to schools that are earmarked for a particular student that is selected by the Donor or Advisor), private non-operating foundations, to supported organizations controlled by the Donor or Advisor, or to political candidates or parties. Grants may not confer a private benefit on a Donor, an Advisor or any persons related to them. This prohibition includes, but is not limited to, payment of membership fees to third parties, purchase of benefit tickets, educational tuition for donor or family members, or items bought at a charitable auction. This policy ensures that grants are entirely charitable in nature.
Grants cannot fulfill pre-existing binding pledge obligations, as the IRS views paying a pledge on the same terms as paying any other debt that a donor owes, and therefore takes the position that paying a pledge confers an impermissible private benefit to the donor. Accordingly, if a Donor or Advisor is interested in having the DAF support a charity on a multi-year basis, the Donor/Advisor should not sign or execute a pledge agreement with a charity but should instead recommend that ABF enter into a pledge for a multi-year grant.
Grants, loans, compensation, expense reimbursement or other similar payments cannot be made to a Donor, an Advisor or any persons related to them, directly or indirectly.
V. Grant Processing and Distribution
Grant recommendations are generally processed and, if approved, distributed in the following way:
Grant Processing: ABF or its designee reviews recommended grants and researches recommended recipients. If ABF identifies any concerns regarding the mission or operations of a recommended recipient, ABF will contact the Advisor within two (2) weeks of the initial grant recommendation to discuss the situation. ABF reserves the right to deny any grant request for any or no reason.
Grant Distribution: Grant checks are mailed directly to the recommended charity accompanied by a letter identifying the DAF and specifying the intent of the grant, as outlined in the grant recommendation, unless anonymity is requested.
VI. Program Fees
ABF charges the following fees to help cover the cost required to maintain DAF operations which shall be set forth on a fee schedule, which may be amended from time to time:
Administrative Fees: These fees are deducted annually from a DAF to help cover DAF operating expenses such as grant making, recordkeeping, annual audits, tax filing, quarterly statements, and other legal and fiscal responsibilities. Fees are subject to change at any time in the sole discretion of ABF and are currently equal to the greater of 1% of the DAF balance per year or $250 per year.
Investment–Related Fees and Expense: These are deducted from ABF’s investment funds, which may or may not include any ABF oversight expenses or investment management fees, third-party investment advisor charges, mutual fund fees and expenses, consulting fees, custodial charges and/or trading costs.
Non-Liquid Asset Fees: These are charged on gifted assets other than cash and publicly-traded securities (such as real estate, restricted or non-publicly-traded securities, closely held business interests, partnership interests, LLC interests, tangible personal property and retirement plan benefits) and may be subject to costs associated with the special handling required to receive and liquidate them. ABF will provide a Donor with estimates in advance of any additional fees related to gifts of this nature.
VII. Reporting and Accessibility
ABF will provide the Donor (and Advisor, in the event those are not the same person) annual account statements detailing account transactions, contributions, grant activity, account balances, and funds available for grant making. These statements will also be made available to the Donor and the Advisor upon reasonable request.
VIII. Privacy and Disclaimers
ABF will maintain all privacy of Donor information in accordance with the ABF policies.