A Direct Agreement between Nonprofit and the Donor

The DMI Account Program can be offered by any nonprofit organization that also qualifies as a 170(b)(1)(a) organization under the IRS Code, and is not subject to community foundation regulations or other exemption restrictions. This includes educational institutions, religious organizations, health care facilities, and publicly supported charities. Unlike a commercially sponsored donor advised fund, funds that are gifted to a particular charity are owned directly by that charity, rather than an intermediary subject to community foundation regulation. This feature allows the charity to offer their donors the ability to pursue investment strategies that employ active trading in stocks and bonds, mutual and index funds, as well as alternative investments. Investment control through a DMI Account approaches the level offered by private foundations - without the costs or regulatory and reporting requirements typically associated with them - and provides donors with a unique ability to manage gifted assets after contributing them.

Program Mechanics

Operation of the DMI Account Program is governed by the terms of a customized Gift Agreement, which is completed by the donor and nonprofit at the start of the program. The Gift Agreement spells out the terms and conditions under which the gifted funds can be managed by the donor. Once the Agreement is completed, the gift is made directly to the nonprofit while utilizing a brokerage firm and investment manager selected by the donor. Unlike a commercially sponsored donor advised fund or a community foundation, gifts managed through a DMI Account are made directly to the intended nonprofit recipient.

Once the DMI Account is operative, the donor is granted authorization by the nonprofit to direct the investment management of the gifted funds for an agreed period of time. During this time the donor is free to follow his or her own investment strategies, as permitted under the agreed investment guidelines, while investment gains accrue tax-free for the benefit of the nonprofit organization. Account statements tracking activity in each donor’s account are provided to the nonprofit on a monthly basis, verifying compliance with investment guidelines, reporting portfolio composition, and evaluating performance history. At the conclusion of the agreed investment period, responsibility for investment management returns back to the nonprofit. At that time, all funds accumulated in the brokerage account are applied to the mutually agreed purpose established at the outset of the arrangement.

The DMI Account Program provides several levels of protection for the participating nonprofit to ensure that the investment of these funds is managed in a manner consistent with the institution’s risk profile. As the legal owner of these funds, each nonprofit also retains the unfettered right to reclaim the investment privileges extended to the donor at any time.