A community foundation recently contacted the Council on Foundation's legal team with an inquiry about naming a successor-or successors-for a donor advised fund (DAF).

In this particular situation, a potential donor wished to establish a DAF where his children are named as the successors-but was concerned that the different siblings may disagree about distributions from the fund when they acquired control as successors. The donor wondered whether the agreement for establishing a DAF could include a provision that would split the DAF into multiple, separate funds with his children named, individually, as a successor to each.

The legal team advised that including such a provision in the agreement was permissible, so long as the power for deciding to split the fund ultimately belonged to the foundation. For example, using language to indicate that: in the instance of having multiple successors named one fund, where the successors' interests are incompatible, the foundation may use its discretion to divide the fund into two or more funds, subject to the same terms and conditions as the original fund, and also subject to separate fees.

The legal team emphasized that the most important requirement here is that the decision-making authority to split the fund remain with the foundation rather than occur at the directive of a donor.

For more information on this or other tricky charitable matters, we will try to help, so please contact the Community Foundation of Tompkins County at nmassicci@cftompkins.org.