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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