‘Forbes’: Giving’s Dangerous Games

September 23, 1999 | Read Time: 2 minutes

Aggressive “charity hustlers” are marketing planned-giving schemes that have much less to do with philanthropy than with shielding assets from taxes, says Forbes magazine (September 20) in a collection of articles on giving.

“Capitalizing on Americans’ generosity and aversion to taxes,” the magazine says, “an army of middlemen is on the loose, peddling complex and sometimes very shaky schemes for charitable gifts.”

The marketers, who include stockbrokers, financial planners, and insurance salesmen, “are urging investors to buy into complex strategies that often involve irrevocable commitments that play out over a long time. Their pitch is that you can use the tax code’s breaks for charity both to do good for others and to do well for yourself.”

The trend toward commercialization is growing, according to experts quoted by Forbes.

“This market is going to explode, and financial advisers are going to drive it more than non-profits,” Russ Allan Prince, a market researcher in Shelton, Conn., told the magazine.

A survey that Mr. Prince conducted in March found that of 700 financial planners, 44 per cent intended to emphasize charitable strategies, up from 12 per cent in the past, according to the magazine.

Forbes acknowledges that non-profit organizations can benefit from some of the new giving strategies. But the magazine casts doubt on several emerging approaches, including: charitable split-dollar insurance, in which charities and wealthy donors divide the proceeds of life-insurance policies purchased with tax-deductible dollars (The Chronicle, August 13, 1998), and a form of accelerated charitable remainder trust that is sometimes called the “chutzpah trust” for its brazen approach to sheltering assets from taxes (The Chronicle, July 15).

In a companion story, Forbes profiles New Life Corporation of America, a charity in Brentwood, Tenn., that also goes by the name of National Community Foundation. The organization has stirred controversy for offering to pay commissions to financial advisers who help donors set up charitable gift annuities (The Chronicle, December 17, 1998).

Response to the Forbes articles has been mixed. On an Internet discussion list, one prominent fund-raising expert lambasted the magazine for its display of “ignorance” about charitable giving and its “misdirected” focus on questionable tax loopholes.

But a fellow fund raiser sought to temper his colleague’s vitriol. Of the Forbes article he wrote: “I believe that some in our profession have brought this scrutiny on ourselves.”