The
new horror story I read this morning has to do with banking and charitable
giving. I want to urge all my friends and readers to get their hands on the
July 14 issue of the New York Review of Books and read “The Undermining
of American Charity” on pages 17 and 18 (or read here). The authors of the two-page feature
are Lewis Cullman, a 97-year-old philanthropist who has given over 90 percent
of his wealth to charity in the course of his lifetime, and Ray Madoff, a
professor of law at Boston College and director of a philanthropic think tank
at BC.
There
is plenty of so-called “news” that the public doesn’t really “need to know” at
all. This
is information you do need.
DAF.
Do the letters mean anything to you? They stand for donor-advised funds and are
part of a very successful business plan undertaken by major financial
institutions.
Say
you donate directly to a charity. You will probably want to check its track
record and make sure your donation is going to a worthy cause and not simply
into administrators’ pockets. What if you have millions or billions to donate?
How will you decide where to give and how much and when?
A
DAF is a middleman between donors and charities. However much you put into a
DAF account, you get an immediate tax break, just as if you’d donated directly
to one or a number of charities; the organization, however, can hold your funds
indefinitely, enhancing the parent financial institution’s bottom line and
collecting management fees.
The
story gets worse. By “indefinitely” you must understand no limit to the length
of time “donations” can be withheld from waiting charities. You may die, your children may die, and your
grandchildren may inherit the job of “advising” the DAF on charitable
disbursements – however (BIG “however”), when you put your money in the DAF,
you gave up all legal control over it. Courts have upheld the rights of DAF
fund sponsors over wishes of donors. Yes.
There’s
more, but you need to read the article, especially if you’re really, really rich
and think a DAF is the way to make sure you come out as far ahead of the IRS as
possible. Don’t be lazy, don’t be cheap, and don’t be stupid. Take responsibility
for your own charitable giving and make sure the causes you want to support
reap the benefit of your generosity.
