Opinion: Require Donor-Advised Funds to Spend on Charity Sooner

Congress should enact laws requiring donor-advised funds to distribute assets to charities within seven years to ensure that the tax-deductible gifts pouring into such funds benefit nonprofits in need, a law professor suggests in a New York Times opinion column.

A fast-growing charity vehicle increasingly favored by wealthy donors and foundations, such funds allow givers to take immediate tax deductions on contributions, which the fund managers hold, invest, and eventually distribute to charity.

Ray D. Madoff of Boston College Law School notes that the funds are often managed by large financial institutions that make money from management and investment fees, an no one is obliged to allocate the money within a set time.

“Instead of providing immediate relief to the needy and fuel to the economy by paying for goods and services, much of this money does nothing at all for an indefinite period,” Ms. Madoff writes. “This is particularly troubling at a time when government cutbacks are going to make more people dependent on the charitable sector.”