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Maggie knew she wanted a donor-advised fund (DAF) to help manage her charitable giving and give her great tax benefits. She also understood that not every DAF provider shared her world view, and she knew she needed one that matched her conservative principles
Through her research, she came across a boutique DAF provider that shared her perspective and wouldn’t be holding its nose when making grants to the small-government and religious-advancing charities that she prioritized in her giving.
Just as she wouldn’t stop eating out because a single restaurant disappointed her, Maggie looked around until she found a perfect match.
Had Maggie first read a recent article in the Libertas magazine, titled with the question, “Are Donor Advised Funds Safe for Conservatives?”, she might have hesitated to strike out to find just the right DAF for her.
But it turns out that the community of donor-advised fund providers offers the same benefit as any thriving marketplace – consumer choice.
Follow Your Compass, Not Theirs’
The real point donors like Maggie should take away from the Libertas article is this: If donors don’t take steps to protect their donor intent, someone else will guide those choices – and will often guide them astray.
In the article, this point is made at the outset, but in too narrow a way: “Although many conservatives have used donor-advised funds to successfully advance their ideas, reliance on these unique giving vehicles could lead to gross violations of donor intent and the hijacking of millions of dollars intended for conservative causes.”
That’s true. However, the same is true for a donor leaving money behind in a private foundation, as the Exhibit A examples of Ford, Rockefeller, Pew, and (more recently) Surdna Foundations show.
Leaving posthumous gifts in the hands of heirs is likewise fraught with danger, particularly if the kids don’t share your values and priorities. Statistically, their first purchase is more likely to be a new car, and I don’t know of any liberty-advancing charities selling sedans.
It’s true that a donation into a donor-advised fund is an irrevocable, unrestricted gift, and it’s very important that donors understand this. Once given, the funds are legally owned by the DAF provider.
Giving that contribution offers you advisory privileges, but not ownership. Generally speaking, the provider will follow your wishes unless the request runs counter to the DAF provider’s stated principles.
That irrevocable transfer enables more generous tax advantage for the giver as compared to giving into a private foundation. If the donor is wary of the loss of control, a donor-advised fund may not be his or her cup of tea.
Let’s consider the DAF provider’s ability to say “no” from a different lens, though. If you work with a mission-driven donor-advised fund – and there are several that support conservative values, such as National Christian Foundation, Bradley Impact Fund, and DonorsTrust, where I work – , your partnership comes with a basic agreement on elements of donor intent. That protects your giving right from the start.
Or, as one of our clients told us recently, “If you are with DonorsTrust, and you drop dead, your son can’t come in and give to socialist orgs.”
Typically, when we turn down a grant request, our donors thank us. It means we’ve learned something about the organization they didn’t know. Often it’s that the group takes more government money than the donor would like, or that some of its projects run at cross-purposes to our shared values of limited government, personal responsibility, and free enterprise.
Further, with a well-defined donor intent statement, a DAF provider can do more than simply execute your wishes after you’ve passed away. It can use your intent to pause or redirect a gift if an organization you historically supported begins to run counter to your wishes.
The Libertas interview correctly points out that the big-bank commercial DAFs will sometimes say no for the opposite reason. Groups such as Southern Poverty Law Center and Human Rights Campaign have slandered a number of conservative and libertarian groups in such a way as to make the commercial DAFs hesitate or even refuse to make gifts.
If that makes you uncomfortable, don’t give up on donor-advised funds as a whole – simply exercise your right not to use those providers!
Why Wouldn’t You Use A DAF?
Perhaps the real question is why wouldn’t a conservative-minded donor want to use a donor-advised fund? As a tool, DAFs address principles we care about:
- They’re a simple and efficient means to give, allowing donors to focus more on the outcomes of their giving than the back-end mechanics.
- DAFs give donors additional ways togive in a tax-smart way, particularly with their ability to turn a single gift of appreciated stocks or complex assets into any number of charitable gifts, potentially with significant tax savings.
- Donors gain more privacyfrom giving through a DAF, making it easier to stay off mailing lists or to simply give without unwanted praise and recognition.
- DAFs allow you to build up charitable wealthover time so you can give a bigger gift on your timetable instead of being driven by government tax deadlines.
Donors of every ideology, size, and creed should be thoughtful in making a charitable intent plan. As we say in our 8 Steps to Securing Your Donor Intent guide, “You don’t have to leave behind a Rockefeller-sized fortune to experience the pitfalls of unsecured donor intent.”
Working with a donor-advised fund that shares your principles offers a simple step toward protecting your intent. That’s true in life but also as part of your estate planning.
A donor-advised fund can offer a simple, tax-efficient charitable hub for your estate plan as well as for lifetime planned gifts. You can make a DAF the charitable beneficiary of funds from IRAs, CRTs, CLTs, bequests, and other planning vehicles, streamlining your giving into one place.
Again, the place you entrust to maintain and carry out your legacy and the instructions you leave behind are the most important factors in whether your intent will be carried out, not the vehicle itself.
Define Your “Why” First
It’s a mistake to write off an entire (and the most rapidly growing) class of philanthropic tools simply because of mistakes by some misaligned apples. Donor-advised funds offer conservative and libertarian donors the same basic benefits as they do anyone else. Choosing the right donor-advised fund only makes the tool more powerful.
Before choosing any charitable tool, the first thing to do is focus on your “why.” What guides your giving? How is the world a better place because of your philanthropy? Our client Maggie knew her why, and also wanted a partner to make sure that her giving stayed true to that purpose.
Searching for the boutique donor-advised fund explicitly built around your cherished principles will be time well spent and could be your best means of ensuring you leave the legacy you intend.
Reprinted with permission from - DonorsTrust - by Peter Lipsett