WORTH Giving (and Getting) with a Donor Advised …Giving (and Getting) with a Donor Advised Fund Story by S. Kay B ell T hese Combo I nvestment/ P hilanthropic A ccounts O ffer the
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38 austinwoman November 2007
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worth
you’ve heArd The nAmeS. The bill And melindA
Gates Foundation. The Pew Charitable Trusts. The
John D. and Catherine T. MacArthur Foundation.
And you’ve thought, “When I win the lottery, I’ll
set up my own philanthropic foundation, too.”
Well, you don’t have to wait for your lucky num-
bers to come up. With a donor advised fund, Jane
and John Q. Public can establish a philanthropic
legacy that will give even when they personally
aren’t able to do so.
Never heard of a donor advised fund? You’re not
alone. This giving option isn’t at the top of most
people’s list of ways to support good works. But
that could soon change.
According to the National Philanthropic Trust,
donor advised funds are the fastest growing chari-
table giving vehicle. New accounts increased 21%
from 2005 to 2006. More than 106,500 accounts
hold approximately $21.6 billion in assets. And
around $12 billion a year goes from donor advised
funds to charities.
Defining Donor Advised FundsSo what exactly is a donor advised fund?
You, the donor, contribute cash or assets to a public
charity that sets up the donor advised fund. The pub-
lic charity is the sponsoring organization. Then, (as
the name implies), you, the donor, advise the sponsor
on which group should receive fund money.
“Opening up a donor advised fund is like open-
ing up a savings account, while starting a founda-
tion is like opening up a bank,” said Eileen Heis-
man, president and CEO of the National
Philanthropic Trust. “Which would you rather do?”
Heisman carries the savings account analogy
further: “We often call it a charitable savings ac-
count. It’s charitable in its intent. Savings means
Giving (and Getting) with a Donor Advised Fund
Story by S. Kay bell
these Combo investment/philanthropic accounts offer the rest of Us a Way to Donate like the rich
See Donor aDviSeD funD on page 41
November 2007 austinwoman 41
that it’s long term. And account means it’s sepa-
rate, but part of something bigger.”
Technically, though, a donor advised fund is an
investment. When you establish the fund, you have
choices as to how the money will be invested. As
with traditional investments, there is a minimum
amount required to establish a donor advised fund,
in some cases as little as $5,000.
That’s the key number for a donor advised fund
via the Austin Community Foundation.
“We can make anybody a philanthropist,” said
MariBen Ramsey, interim director and legal coun-
sel for the Austin Community Foundation. “If it’s
an endowed fund [i.e., one designed to award a
yearly amount to charities from earnings while
leaving principal intact], we ask that at the end of
three years you have $5,000 in it. If you’re trying to
get there and haven’t quite made it but are routine-
ly putting money in, we’ll work with you. You just
can’t give anything away until you get $5,000.”
Putting the “Fun” in “Fund”If you have five grand, why not give it directly to
a favorite charity or two or more? Why bother with
a donor advised fund? Because the structure of a
donor advised fund puts the “fun” in “fund.”
When it comes to charitable giving, the fun part
is watching your gift go to good causes and not
dealing with the associated administrative hassles.
With a donor advised fund, the sponsoring charity
takes care of all that.
“Even people of enormous wealth all say they
want to focus on the giving, not the filing, not
checking on how many checks they’ve written or if
a particular check has cleared,” said Heisman.
Those tedious but necessary duties are the job
of the fund’s staff, which also checks out groups
that the donor advises they support. “We really do
provide a staff to do work to help people who have
a donor advised fund,” said Ramsey. If a donor is
interested in children’s health agencies, she said,
the staff will find all eligible ones.
“If you need to know more about the nonprofits
and organizations in the Austin area to help you
decide where you’d like to recommend grants be
made, the staff will provide that,” said Ramsey.
“And if you already know where you want to give,
we’re happy to just facilitate the grant making.”
The staff will also check out any grant recom-
mendations a donor makes to ensure the designat-
ed group is qualified, both in the IRS’s eyes as well
as under the fund’s rules.
Less and MoreThose recommendations are what some view as
a drawback to donor advised funds. Even though
you established the fund, the word ‘advise’ is there
for a reason. The sponsoring charity’s board makes
the ultimate decision on gifts.
Donor aDviSeD funD from page 38
See worth on page 42
There are countless entities that offer donor advised funds, from universities to hospitals to community foundations to commercial investment companies to brokerage firms. Here are just a few:
Austin Community Foundationwww.austincommunityfoundation.org
512.472.4483
Fidelity Charitable Gift Fundwww.charitablegift.org
800.262.6039
National Philanthropic Trustwww.nptrust.org
888.878.7900
San Antonio Area Foundationwww.saafdn.org
210.225.2243
Schwab Charitable Fundwww.schwabcharitable.org/scf
800.746.6216
T. Rowe Price Program for Charitable Giving
www.programforgiving.org800.564.1597
Donor Advised Fund Options
42 austinwoman November 2007
“You do give up a few things,” said Heisman. “You
give up total control. You can give advice on invest-
ment and management options and grant making,
but at the end of the day, the board of the charity
that houses the fund makes the final decision.”
That said, a donor gets lots of input. And most
charities, said Heisman, will be as flexible as they
can within the legal requirements. For example,
you can’t make a grant to pay an existing pledge
you made in your own name to your church, but
you can recommend a new gift from the fund to
help another project at your house of worship. Nei-
ther can you use donor advised fund money to pay
for auction items, galas or memberships offered by
a charitable organization.
In situations where a donor’s recommendation
doesn’t meet the guidelines, both Ramsey and Heis-
man said that the fund’s staff will work with the
donor to find a suitable replacement organization
to receive the grant.
And while you give up some direct control, Ram-
sey said donor advised funds offer “an almost lim-
itless range” of recipients – from religious and cul-
tural institutions to alma maters to your local
firehouse.
Donor BenefitsMost people give to charities because they want
to, but receiving a more tangible reward for your
generosity is always appreciated. And a donor ad-
vised fund can pay off for a donor in several ways.
Any contribution to the fund, either in cash or
assets, is tax deductible to the extent allowed by
law for the tax year in which it is made.
You can contribute when you otherwise might
not be able to do so. For example, if you encounter
unexpected expenses that limit your discretionary
income one year, your favorite charity won’t suffer
since your gift will come from your previously es-
tablished donor advised fund.
Because the fund is invested, it has the potential
for tax-free growth. This means your ability to
make greater charitable gifts through the years
also increases. And your fund can continue beyond
your lifetime when you name successors to your
account.
Donor advised funds also can offer a way for
families to share the philanthropic experience.
Heisman recalled a couple who allowed their chil-
dren to help in making grant recommendations.
The 9-year-old daughter took the responsibility
very seriously, researching groups that benefited
children, such as Coats for Kids.
“She was interested and committed and did her
due diligence,” said Heisman. And that opportunity
to give to others was a gift that benefited the young
donor as well as the children she helped.
worth from page 41
If you’re thinking of opening a donor advised fund, here are some things to consider.• Doesthefundlimitwhetheryoucanspend
down the principal?• Ifyouwanttopassthefundontoyour
children, are the number of generations limited? “Sometimes you can pass it to children only, not grand- or great-grandchil-dren,” said Eileen Heisman, president and CEO of the National Philanthropic Trust.
• Whattypesofrestrictionsdoesthesponsoringcharity have on grants? Some are regional in nature and won’t accept international grants.
• Arethereanyreligiousconsiderations?Somefunds, said Heisman, might want a certain percentage or all of its grants to go to a religious group.
• Whatarethefund’sfees?Therecouldbeasmany as three fees: a sponsor administration fee, an investment fee and an account maintenance fee.
• Whataretheassetmanagementoptions?The selection is usually not as broad as regular investment vehicles. Read the fund’s prospectus thoroughly.
What to Look For in a Donor Advised Fund
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