A philanthropic revolution
You've probably never heard of donor-advised funds, but they are taking over the philanthropic world.
It started as a matter of economics. A million dollars to most of us is a lot of money, but as start-up cash for a philanthropic foundation it's chump change. A million-dollar foundation can easily cost more to run than it gives away.
So an alternative was created by the IRS to give modest philanthropic efforts an easier path to existence, bundling them under an umbrella nonprofit for investment and management. A donor-advised fund offered the wannabe philanthropist the same tax deductions as a foundation but without the red tape. No annual disbursement was required; no annual report either. The money can come in and go out whenever, however and to whomever the donor likes.
In February, the Chronicle of Philanthropy unveiled its 2013 list of America's top givers to charity. For the first time in history, the top living donors, Mark Zuckerberg and his wife, Priscilla Chan, gave their money ($996 million) to a donor-advised fund set up with the Silicon Valley Community Foundation.
They were followed by John and Laura Arnold ($296 million), who put some of their largess into a “giving account” with the Fidelity Charitable Gift Fund, a collection of donor-advised funds run by Fidelity Investments. A few clicks down the list was Alfred Mann's $70 million gift to his donor-advised fund in the Nevada Community Foundation.
Fidelity Charitable is now the second-largest nonprofit organization in the United States — bigger than the Boy Scouts, bigger than the Red Cross, bigger than the Salvation Army. Another similar donor-advised fund manager, the Schwab Charitable Fund, raised more money last year than Harvard.
It was Fidelity, in fact, that kick-started the revolution. When the IRS first established donor-advised funds, they were the philanthropic stepchildren of community foundations, whose boards and staffs considered them something of a nuisance. Ned Johnson, the canny founder of Fidelity, saw them as an opportunity to invest billions of charity dollars. He trained his staff to tout the advantages for donors and ran full-page ads in Time, New Yorker and Smithsonian magazines.
Not that there hasn't been a backlash. The most common complaint is that without minimum-disbursement rules and reporting requirements, donor-advised funds have the potential to become shadowy charity warehouses, allowing a Mark Zuckerberg to get a tax deduction immediately and then take years or even decades to distribute the funds to charity.
But according to a recent study conducted by the National Philanthropic Trust, a provider of donor-advised funds, around 11 percent of the assets in such funds are disbursed every year, more than double the 5 percent payout requirement of private foundations. By law, once a donor gives money to a donor-advised fund, it may never be retrieved and must be spent only for philanthropic purposes. Besides, why someone would give away a dollar just to get a tax deduction of, at most, 39 cents defies logic.
As a career fundraiser, I learned that people cannot be forced to be charitable, but it helps to remove the barriers to giving. Donor-advised funds are an easy in, easy out way to give away money. The philanthropic revolution is on and donor-advised funds are winning.
Jack Shakely is president emeritus of the California Community Foundation in Los Angeles and senior fellow at the Center for Philanthropy and Public Policy at the University of Southern California.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Penguins testing Fleury, Maatta, Bortuzzo for mumps
- Police: Deer rifle in vehicle at Southmoreland High School
- Sony cancels ‘The Interview’ Dec. 25 release
- Parent finds body in parking lot of Stanton Heights elementary school, prompting lockdown
- Son charged in dismemberment death of Penn Hills couple
- Route 981 sewage project could cost less
- Former Charlotte coach to lead Riverhounds
- Squirrel Hill lawyer suspended from practicing until September
- Steelers lookahead: Chiefs’ Charles injured but remains dangerous threat
- Braddock man admits to role in drug ring
- Pitt coach Chryst expected to take Wisconsin job