Donor-advised funds provide added means for charitable giving
With his 60th birthday approaching, John Irvin began contemplating his legacy.
The Shaler native decided to give a large block of publicly traded stock to establish a “donor-advised” fund through The Pittsburgh Foundation. The grant-making vehicle enabled the Irvins to direct charitable giving and reap the benefits of greater tax deductions, more flexibility over spending and fewer regulatory costs and hassles than they would've faced by forming a private foundation.
The Irvin Family Fund now sends thousands of dollars annually to causes such as Haitian health care and orphanages, local faith-based mentoring programs and efforts to improve the lives of impoverished children across greater Pittsburgh.
“It's a perfect arrangement for my family,” said Irvin, 61, whose children participate in the grant-making and live within five miles of him and his wife, Colette, in Allegheny County's North Hills. “The only stress we have is finding baby sitters so the kids can meet and build consensus on where to give.”
Rise of the ‘mini-foundations'
Families such as the Irvins are turning to donor-advised funds as charitable tools at a furious pace.
The number of donor-advised funds at The Pittsburgh Foundation — Western Pennsylvania's largest community foundation — more than doubled from 445 in 2006 to 892 in 2015, and are valued at a combined $260 million, foundation records show. The funds range in value from just over $10,000 to more than $10 million.
Last year, those funds doled out $16.3 million to causes and nonprofit groups chosen by their donor-advisers, who receive free guidance, meeting space and vetting resources from foundation staff and their networks.
“Some donors come in, and they know exactly what they want to do and which organizations they are about, and it's a very simple process for them,” said Jeanne Pearlman, senior vice president for program and policy at The Pittsburgh Foundation, which charges donor-advised funds administration fees of 0.5 percent to 0.7 percent and investment management fees of 0.3 percent to 0.88 percent, depending on the fund's size and manager.
“But for others, what they know is where their passion is. They know they care about children, or women's issues or the environment or arts and culture — but they don't know the sector very well,” said Pearlman, a former Pittsburgh Public Schools teacher who specializes in helping donor-advisers look into issues related to education and the environment.
Nationwide, more than 150,000 donors annually are pumping almost $20 billion — or 5.5 percent of all gifts to charitable organizations — into donor-advised funds hosted by mutual funds, brokers or community foundations, National Philanthropic Trust data show. Grants from the funds totaled $12.5 billion in 2014, up from $8.6 billion in 2012 and $9.83 billion in 2013.
‘Donor at the center'
The trend reflects a broader strategic shift in engaging individual donors in philanthropy, The Pittsburgh Foundation President and CEO Maxwell King said.
“We used to think the money was the asset. Now we know the donor is the asset,” said King, a former board member of the National Council of Foundations.
The old model was to “write the check and walk away, and we'll do the grant-making,” King said. “The new paradigm is the opposite. The point of it is to put the donor at the center of everything.”
That new approach is costlier and requires more staff, King said, with The Pittsburgh Foundation growing from about 35 to 45 employees in the past several years. It was a driving force behind The Center for Philanthropy, a newly renovated 11,000-square-foot space on the second floor of the foundation's Downtown offices at Five PPG Place. The brightly lit space includes meeting rooms, a circular “kiva” group space, LCD screens for presentations and walls that convert into giant dry-erase boards for brainstorming.
“They will help us create a list of organizations that we'd otherwise never know of,” said Carrie Casey Leemhuis of Fox Chapel, who helps oversee a donor-advised fund started six years ago with her mother, Gloria Casey, with input from her two children, ages 23 and 15.
“And the nice thing about having multi-generations is that different people have different interests,” added Casey, whose fund gives grants to groups such as Backpacks for Hunger, a parent-run program to feed low-income students over weekends and school breaks; and RiverQuest, a river-based science education program.
Gifts large and small
In late December, The Pittsburgh Foundation secured the largest individual donation made at one time by living donors in its 70-year history — a $15 million gift from a Boston couple with Pittsburgh ties.
Richard Hunt, 89, grandson of Alcoa founder Alfred E. Hunt, and his wife, Priscilla, 86, chose their three children to advise the fund, which they intend to spend on groups such as the Southern Poverty Law Center and Carnegie Mellon University.
“They want to be part of the giving and they want to do it during their lifetime,” said Bill Hunt, 53, of Squirrel Hill, who learned about donor-advised funds during his time on the board of The Pittsburgh Foundation.
Not all donor-advisers have such deep pockets. The average value at The Pittsburgh Foundation is less than $40,000.
“The beauty of the community foundation model is you don't have to be a multimillionaire to be a philanthropist,” Pearlman said.
At the POISE Foundation, a Downtown-based community foundation devoted to improving the lives of people in the black community, donor-advised funds start as a low as $1,000 — though the foundation requires donors to build up to at least $5,000 in assets before distributing grants.
“It gets people thinking and learning about the community,” POISE Foundation CEO Mark Lewis said.
Since 2011, donor-advised funds at The Pittsburgh Foundation have distributed $50.2 million to nonprofits and causes — the bulk of which stayed in Western Pennsylvania. About $22.5 million went to work within the city of Pittsburgh, while $6.1 million went to Allegheny County, $3.7 million to Westmoreland County, $1.1 million to Butler County; and $1.4 million to Lawrence County.
The Pittsburgh Foundation requires donor-advised funds be set up in perpetuity, meaning money can never be withdrawn for purposes other than giving to approved nonprofit recipients. The funds can have unlimited successor donor-advisers.
“I fully expect that my children will be working on this as well as their children, my six grandkids,” Irvin said.
Natasha Lindstrom is a Tribune-Review staff writer. Reach her at 412-380-8514 or email@example.com.