Charitable Giving Through Donor-Advised Funds

Donor-advised funds are an investment tool for donors who want to avoid the hassle of a traditional foundation by giving to a charitable fund managed by someone else.  The use of these funds and transfers from foundations appears to be on the rise.  Some benefits of donor-advised funds include:

1. Lower administration costs by pooling resources and staffing.
2. Tax benefits, such as immediate deductions.
3. Donor control through advising on where grants should go.

4. Investment benefits, such as diversification and no minimum annual payout.

But there are drawbacks, such as loss of final discretion, possible minimum starting contributions, and inferiority for donors with very specific goals.  For an informative comparison of the “big-three” donor-advised funds and details on the pros and cons, see Mike Spector, Family Charities Shift Assets to Donor Funds, Wall St. J., April 22, 2009.

Thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.