Donor Advised Funds: The Abstraction of Doing Good

on in Fundraising

A NY Time Business Section article recently described donor-advised funds as “a trendy philanthropic loophole.”

While the article focused on the tax benefits and timing of setting up a donor-advised fund after a tech company goes public, the larger issue – of appearing to be public-spirited without losing control of your money – was only barely mentioned.

Setting up a donor-advised fund is, often but not always, a way to feel that one is doing good – without committing to a single social issue or cause. 

Some of the Donor Advised Funds the Times mentions have yet to give out any public grants, years after they were set up – unlike foundations, which must pay out 5% of their net assets every year, donor advised funds can hold onto their assets in perpetuity (while the donor gets the tax break in the year the fund was established).

On the one hand, the dollars that go into a donor advised fund must be used for a public purpose. That’s good.

But on the other hand, the “when” of that is open-ended. Which doesn’t help any of us on the nonprofit end, feeling the urgency of now.

Unpacking the statistics on 2017 charitable giving, it’s clear that while overall giving went up, that was powered by “mega-gifts” to private foundations. “Investment returns funded multiple very large gifts, most of which were given by individuals to their foundations” notes the study, which goes on to conclude: “This tells us that some of our most fortunate citizens are using their wealth to make some significant contributions to the common good.

Well, sorta. Much of that wealth is not (yet) creating social good – it’s sitting in a different bank account biding its time.

It’s providing a public face of giving – without the substance.

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