I subscribe to the Chronicle of Philanthropy, which is typically pretty good about vetting articles. But an article by Ray Madoff about donor-advised funds shouldn’t have gotten past their editors. He seems to have a big problem with donor-advised funds contending that they benefit the donor rather than charities. He has it all wrong.
The most glaring error in his article is that he says private foundations can meet their 5-percent payout rule simply by transferring money to donor-advised funds rather than giving to a charity that will use the money. Simply put, that is illegal and was made so by the Pension Protection Act six years ago.
Madoff doesn’t understand that donor-advised funds encourage philanthropy. When a gift is made to a donor-advised fund, it is irrevocable. It is going to benefit charity, and whether it happens immediately or over a period of years really doesn’t matter. In fact, many donors make a big gift to a donor-advised fund during years when they receive extra income or sell appreciated assets; they make the gift with the plan to distribute it over a period of time.
He actually says that “donors and the people who manage their money have gotten the most from the funds, while charities are being starved of resources.” Doesn’t he remember that it is the donors’ money and their generosity in the first place? Donor-advised funds don’t discourage any giving and do help with more gifts. Wouldn’t it be a shame if misinformation like this led to restricting the use of donor-advised funds? As a fundraiser, I can promise you that if donor advised funds were restricted, charities will learn about starving.
People give by check, stock, property, via the internet, through PayPal, by texting, with multi-year pledges, through charitable trusts, charitable gift annuities, charitable lead trusts, private foundations, by bequest, community foundations, and yes, by using donor-advised funds. And we need all of these options to encourage and enable giving to happen.
By the way, the donor-advised funds at the Community Foundation of Western Nevada total about $28 million in current assets, but more than $40 million has been distributed. Sounds pretty good to me.
Tom Hall, our Chair-Elect, recently shared a great quote by Naveen Jain that describes what we do.
“Philanthropy is not about giving money but about solving problems. While well-meaning, the idea of writing a check and calling it ‘philanthropy’ is extremely short-sighted and, unfortunately, extremely pervasive.”
We make philanthropy simple, powerful, and effective.
Chris Askin, President & CEO,