Key Takeaways

  • Donor-advised funds (DAFs) function as financial translation layers, accepting appreciated equity through the automated customer account transfer service (ACATS) and converting it to cash checks that small non-profits can actually deposit.
  • Electronic fund transfers like wires and ACH fall apart for unsolicited gifts because calling an unfamiliar non-profit to request bank routing numbers triggers fraud alarms and imposes high administrative coordination costs.
  • Paper checks dominate charitable disbursements because the IRS maintains public databases of verified corporate names, 501(c)(3) tax status, and postal addresses, enabling payouts with zero prior communication.
  • Tech windfalls stress-test this paper-based system; corporate programs like Anthropic offering uncapped three-to-one donation matching flood small charities with high-volume payouts their back offices must manually process.
  • McKenzie organizes this distribution mechanic into The Three Requirements for Unsolicited Check Payments.

The Three Requirements for Unsolicited Check Payments

McKenzie asks: “They're capable of making electronic funds transfers like ACH payments and wires, but a surprising portion of donations are sent via paper checks. Why, when paper checks are the worst imaginable way to move money?” His answer establishes the core criteria: “Because paying someone with a check requires only three things:”

Requirement 1: Official Name

You need to know their official name.

Requirement 2: Physical Delivery

You need to be able to put the check physically in their hands.

Requirement 3: Prompt Deposit

You need to know that they will quickly deposit the check after they receive it.

When This Works (and When It Doesn't)

This framework applies when disbursing funds to recipients without requiring advance coordination, advance approval, or prior electronic banking configuration. As McKenzie explains, “Paying someone with a paper check does not require telling them you're going to pay them with a paper check, getting their advance approval to receiving the check, or coordinating with them on check receipt.” Instead, “the DAF can ride on the coattails of tax administration to determine your official name, tax-exempt status, and address you can receive mail at. Those are all public records.” This makes checks ideal for moving capital from complex asset holders to small organizations. As McKenzie notes, “large DAFs know how to use the ACATS system to move shares of stock around, and your local public basketball program probably does not. You can use the DAF as an intermediary to transfer that stock into a check to the basketball program.”

The model breaks when organizations lack full-time administrative staff or physical office spaces. If a mutual aid fund or volunteer-run community group uses a shared post office box checked once a quarter, checks sit uncashed, violating Requirement 3 and forcing DAF administrators to track down stale balances. It also fails completely for cross-border donations, where foreign banking systems refuse United States check clearances and require correspondent banking networks instead.

What to Do With This

Apply this checklist this week if you plan to donate appreciated startup equity, secondary shares, or match an employer program like Anthropic's three-to-one giving initiative:

First, test Requirement 1 (Official Name) by opening the IRS Tax Exempt Organization Search tool. Search for your target charity and copy the exact legal entity name shown on their Form 990, not their informal marketing handle or website title.

Second, satisfy Requirement 2 (Physical Delivery) by pulling the physical address registered on their latest Form 990. Open an account with a DAF sponsor, transfer your appreciated shares directly into the fund through ACATS to avoid triggering capital gains tax, and instruct the DAF to disburse cash to that verified address. Do not call the charity asking for wire numbers; let the DAF print and mail the check.

Third, verify Requirement 3 (Prompt Deposit) by reviewing the organization's Form 990 revenue lines. If they report regular contributions and full-time administrative staff, their office processes checks weekly. If their annual budget is under $25,000 with zero listed staff, send a quick five-dollar donation first or write an introductory note to ensure someone regularly monitors that mailbox before dispatching a five-figure grant.