Donor-Advised Funds Don’t Deserve to Be Singled Out for Criticism

To the Editor:

While I support Alan Cantor’s interest in robust and efficient charitable giving (“Donor Advised Funds Are Booming, but Nonprofits See Little Benefit,” Opinion, May 23), to borrow two words from the opening sentence of the piece, I find “something troubling” about his broadside on this valuable charitable-giving vehicle.

One of Mr. Cantor’s complaints about donor-advised funds is that they serve as “warehouses for charitable dollars.” His underlying implication seems to be that it’s wrong not to spend charitable gifts immediately.

But in that case, consistency requires that Mr. Cantor attack any kind of charitable vehicle that allows for spending over a long period of time, rather than all at once. This encompasses endowments at universities, hospitals, arts organizations, churches, and almost every other type of charity that engages in some sort of saving for the future.

Why make donor-advised funds a target of attack on this basis?

Mr. Cantor cites one anecdote for the proposition that there is a widespread problem with donor-advised funds not making enough distributions.

It is not our experience that donors are looking to hoard and immobilize their charitable giving through donor-advised funds. Simply put, there’s no personal gain in donors doing so, and donors find grant-making enormously fulfilling and satisfying.

Even a comparison with grant distributions at private foundations and endowments, many of which maintain a purposeful discipline around capping distributions at 5 percent (or less), would have been illustrative, as the payouts of donor-advised funds I am familiar with far exceed that threshold.

Another of Mr. Cantor’s concerns is that a financial-services firm obtains a fee for the investment management of assets held in a donor-advised fund.

Yet this is necessarily the case with any type of investment account that a charity holds, whether it’s a permanent scholarship fund at a university or a brokerage account that supports a private foundation’s future grant making or a perpetual endowment for the support of a botanical garden.

Again, why single out donor-advised funds?

What donor-advised funds do, over and over, is expand the amount of wealth that is devoted to charitable giving.

Mr. Cantor himself alludes to how this can happen, and we see week in and week out examples of this in action.

Given the proven attractiveness of this charitable-giving vehicle, it is an expansive leap of faith to assume that as much money would be dedicated to charitable purposes in our communities should donor-advised funds be diminished in their tax treatment from their current rightful grounds on par with other forms of charitable giving.

As a former CEO of a (non-foundation) nonprofit organization, I understand how urgent the need is for money to fund the work of our nonprofits. And as the current CEO of a (community foundation) nonprofit dedicated to creating and offering value-added practices to help invigorate charitable giving, I understand how effective and flexible donor-advised funds at community foundations can be at achieving that goal and more.

Douglas F. Kridler
Chief Executive Officer
The Columbus Foundation