One of the most exciting tools being used widely today is the Donor Advised Fund. Planned giving by philanthropic families used to mean just writing a check to a qualified charity and claiming the tax deduction. But who knew, really, if the charity qualified under the tax law? How does one know if the people running the charity are legitimate and trustworthy?
What is a Donor Advised Fund?
The Donor Advised Fund is a simple investment instrument, unlike private foundations the very wealthy have used in the past. The donor places funds with a host organization, which assumes all legal and administrative responsibilities. Examples of host organizations are community foundations, large nonprofit organizations and investment organizations.
Host organizations provide a variety of services to donors. Services included by The Community Foundation of Greater Atlanta include philanthropic advisor, extensive community and grant-making expertise, philanthropic services, donor engagement and administrative support. For those donors who contribute at least two-hundred and fifty thousand dollars the Foundation provides customized services through The Center for Family Philanthropy created in 2000.
The donor gets an immediate tax deduction. Then is able to recommend grants themselves or appoint someone, or a committee, to recommend grants on their behalf. Those who contribute enough to become a member of The Center for Family Philanthropy get their own grant cycle and a more strategic approach to grant-making.
The ultimate responsibility in awarding the grant does rest with the host organization. But recommendations by the donors are taken seriously. The host organization listens to the donor’s desires and gives to them the information they need to understand whatever decision the host organization determines is proper.
Community Foundations as a Host Organization
Planned giving is done because donors want to help the community and have a positive impact for change. This is done with a well thought-out plan to help those in the community that meet the intentions of the donor and the donor’s family.
Community foundations make great host organizations to help donors. They are very familiar with the geographical area they cover and the issues the community is trying to solve with selected nonprofit organizations. The nonprofits that are selected under-go an extensive business investigation as to their financial status and effectiveness in the community. The advice they are able to give is extremely valuable to the donor in grant making decisions, because they are an integral part of the community’s solution to social issues.
In an interview with Suite101.com, Lauren Norton Welsh, the Vice President of Marketing and Communications for The Community Foundation of Greater Atlanta, talked about giving and grant-making at the foundation during 2008. She said, “2008 was our best year on record for gifts, which totaled one-hundred twenty-one million dollars. But it was also the highest year in grant-making with ninety million dollars going out.”
The Donor Advised Funds Trend
The trend towards donor advised funds seems to be growing in popularity with such investment giants as Fidelity Investments and Charles Schwab actively marketing them, in addition to local nonprofits and community foundations.
Lauren Norton Welsh also states, "We work with professional financial advisors and planners, who work with individuals of wealth who are interested in charitable giving. About ninety percent of our donors are referred to us by the advisors and planners."
Donor advised funds open up philanthropy to a wider range of families with wealth.They also help in teaching future generations the advantages of giving back to the community from both a tax consideration standpoint as well as the satisfaction of helping those less fortunate.
For more on community foundations see Community Foundations Partners in the Community.
