17. Navigating Generosity: Donor-Advised Funds

On this episode of Navigating Generosity, dive into a popular charitable giving tool: the donor-advised fund (DAF). With this broad overview, you'll learn the differences between a DAF and a private foundation, understand what a DAF can and cannot do, and why a DAF might make sense for a client. You'll walk away from this episode feeling more confident in your knowledge of this powerful philanthropic tool.

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Transcript

Transcript
00:00:05 Laurie Crocker
Welcome to Central Florida Foundation's First You Talk podcast. Here you'll gain a better understanding of society's toughest issues. At the end of each episode, we'll summarize the main points and offer deeper dive options, if something piqued your interest. So ready to demystify a complex issue and up your knowledge game?
00:00:25 Laurie Crocker
Let's get started.
00:00:28 Nicole Donelson
Welcome back. This is Navigating Generosity, which is a little bit of a spin-off conversation with First You Talk podcast, and we're kind of honing in on our, you know, space of working with professional advisors and being able to have some conversation that we hope benefits.
00:00:49 Nicole Donelson
Both the advisors out there as well as.
00:00:51 Nicole Donelson
all of the people who may be potential donors giving back to the community. David, excited to be sitting here with you again. Got a great topic today. For those who are just listening for the first time, would you please just share a little bit about yourself?
00:01:00 David Torre
I'm excited to be here, yes.
00:01:10 David Torre
Yes, I am David Torre. I'm a wealth and estate planning strategist based in Winter Park, FL and I'm an adjunct instructor at the Edyth Bush Institute for Philanthropy and Nonprofit leadership at Rollins College. And you know, this is a good time, I think.
00:01:25 Nicole Donelson
I.
00:01:25 Nicole Donelson
So.
00:01:26 David Torre
To ramp up the fun.
00:01:28 Nicole Donelson
People are wondering.
00:01:29 David Torre
And slip in a nice disclaimer here. OK, so I I you know, I used to be a lawyer in a previous life, so here we go. The views and opinions expressed in this podcast are solely my own. This episode is for informational purposes only and does not constitute financial, legal, tax, or professional advice. There we go.
00:01:30 Nicole Donelson
All right.
00:01:48 Nicole Donelson
OK. Glad we got that out of the way.
00:01:51 David Torre
I got that monkey off my back. Yes. So yes, we are talking.
00:01:55 David Torre
What are we talking about?
00:01:56 Nicole Donelson
Today we want to talk about donor advised funds. Exciting, I have to be honest. I talk to people a lot.
00:02:00 David Torre
Ah yes.
00:02:08 Nicole Donelson
And a lot of people don't know what a donor advised fund is, and sometimes we refer to it as a D-A-F or a DAF. So if you aren't familiar with that now, you are. So if someone said David.
00:02:16 David Torre
A DAF, a DAF.
00:02:25 Nicole Donelson
I don't know. I hear people talk about a donor advised fund or I heard it for the first time, or even advisors who are new
00:02:33 Nicole Donelson
to the space,
00:02:34 Nicole Donelson
what is a donor advised fund?
00:02:37 David Torre
Well, a donor advised fund is a relatively - well, it's been around for a number of years. It's relatively recently that it's become quite popular across the country. So backing up, they've been around for 8090 years in, in form in, in.
00:02:54 David Torre
Essence legally allowed, but I would say probably since the 90s, late 90s.
00:03:01 David Torre
They've really exploded in popularity for as charitable giving vehicles for donors coast to coast.
00:03:07 Nicole Donelson
I will add too - community foundations are actually the start of donor-advised funds. They brought the tool to the market and it really blew up when the different larger financial institutions started implementing donor advised funds.
00:03:08 David Torre
Yes.
00:03:12 David Torre
I believe you're correct.
00:03:22 Nicole Donelson
Ones.
00:03:23 David Torre
That is correct and
00:03:25 David Torre
I will. We'll take a stab at describing the donor advise fund itself, and then maybe juxtapose it with the traditional private foundation, because they often are sort of communicated in the same breath with donors and advisors. So quite simply, the donor advised fund is a fund held by what's called a sponsoring organization.
00:03:33 Nicole Donelson
Yeah.
00:03:44 David Torre
And a sponsoring organization is itself a charity, a public charity, and it usually takes the form of a community foundation like you mentioned, or the charitable giving arm of a financial institution. There's some that are special interest type offerings, some are.
00:04:05 David Torre
Located in different geographies, it's kind of across the board, but essentially the sponsoring organization is a public charity.
00:04:12 David Torre
Within that are a bunch of individual funds that donors create, and it's kind of a a charitable giving account, so to speak, almost like a a Roth IRA or something like that where you open the account, you donate assets to that account, those.
00:04:22 Laurie Crocker
Yeah.
00:04:31 David Torre
Assets go in and become the legal property of that sponsoring organization, but the donor retains their status as an advisor on those funds in that account. So that's where the donor advised fund. So the donor advises on
00:04:49 David Torre
grants that come out of that fund; they also advise on how those funds will be invested inside of the account, so they have privileges, but the technical owner is that sponsoring organization.
00:05:02 Nicole Donelson
And the benefit is too they receive an immediate tax deduction for the gift that they make to establish that.
00:05:09 Nicole Donelson
one.
00:05:10 David Torre
Correct. So the the again, the sponsor organization itself is the public charity, so.
00:05:16 David Torre
Oftentimes when we work with donors and clients, using a donor advised fund, there's a a streamlining effect, a sort of organizational benefit to using it because you can make one gift.
00:05:29 David Torre
To that donor advised fund, get one deduction right then and there, and then you can grant out of that donor advised fund as many times as you want throughout the year, or potentially never grant out if you don't want to, or at least not that year. You have maximum flexibility in that sense.
00:05:46 David Torre
So you you can track your giving. You only have to do once a year and you have to do a bunch of checks and things all throughout the year and it's held in that account. That's just for you.
00:05:58 David Torre
The other nice thing about the donor advised fund is you can name it so you can tell the sponsor organization. I want this fund to be called the, you know, Pine Tree Fund or the Smith Family Charitable Fund or whatever version of that you want, according to your creativity.
00:06:18 David Torre
Of course, in their policies. So you really can keep it very personal to you and your family, while kind of.
00:06:26 David Torre
Offloading the admin part, the administrative part to that sponsor organization.
00:06:32 Nicole Donelson
So I know in the world of kind of selection when it comes to.
00:06:40 Nicole Donelson
You're, you know, picking the sponsoring organization, it ranges. You talked about there's different types of sponsoring organization.
00:06:43 David Torre
MHM.
00:06:48 Nicole Donelson
Clearly, we're a Community Foundation, so we are one that offers a donor advised fund. We call it a signature fund option, and that may be a great option for people to look at a Community Foundation, especially if they, you know, are seeking to be more plugged in to.
00:07:08 Nicole Donelson
The local community effort better understand the needs and and kind of the causes and issues that are at hand within their local community. Perhaps connect with other funders, have an opportunity to even collaborate around funding.
00:07:24 Nicole Donelson
And have a little bit more of a a hands on interaction you could say a little more concierge right pick up the phone call somebody get straight through. However, it's also sometimes works well for individuals who work with the charitable giving arm of the financial institutions that they're working with.
00:07:31
Mm-hmm.
00:07:45 Nicole Donelson
Certainly there can sometimes be an advantage when it comes to some efficiencies and streamlining some, you know the the back end components of it. And so you know how.
00:08:00 Nicole Donelson
I guess how? How can people think about that? You know, they're they're probably working with an advisor. They might be making this decision on their own. They're not sure if it's a tool that they should be using. You know, what's something that that individuals should be thinking about when they're considering establishing A donor advised fund?
00:08:19 David Torre
Great question.
00:08:20 David Torre
And you know, going back to, I think 2 episodes ago, you know, donor advised fund is a tool. It's a vehicle. It's not a strategy in and of.
00:08:28 David Torre
Itself.
00:08:28 Nicole Donelson
Exactly.
00:08:29 David Torre
A lot of times, though, because of what's going on with the donor's financial picture, maybe there was a big wealth event in a given year or sale of a business.
00:08:38 David Torre
And they want to kind of get something off the ground and they get this donor advised fund set up and they fund it and they'll say, oh, we'll worry about, you know, what we're going to do with it next year, kind of thing, I think, to the question on which type of sponsoring organization goes a lot to hopefully the strategy and the the intent and the overall plan.
00:08:59 David Torre
Of what the donor wants to do from a charitable giving point of view. So for some folks, geography locality is hugely important, right? So if I lived my whole life in one area, all my roots are here. All my connections are here. I might want to.
00:09:16 David Torre
support my kids' school. The you know the food pantry in my hometown. Geography is really important to my strategy then a Community Foundation in that geography makes all the sense in the world for other donors. They kind of maybe they have causes all over the country. Maybe they kind of have it already.
00:09:36 David Torre
Pretty fleshed out of what they want to do, and they're just looking for, you know, the easiest app to use on the iPad to make my giving maybe a national organization.
00:09:46 David Torre
In.
00:09:47 David Torre
Could be the one to go. Essentially, both types of sponsored organizations can do the same things in in theory, right? It's the same vehicle.
00:09:53 Nicole Donelson
Right.
00:09:56 David Torre
So you can do things like give around the country as long as it's a public charity, right? A Florida based Community Foundation can certainly give a grant to a California located nonprofit right and vice versa, and the each organization can handle.
00:10:16 David Torre
Sometimes it comes up handling complex assets like.
00:10:19 David Torre
Raw land or, uh complicated stock bond type thing. Whatever, you can always use that to fund it as well. I think it often comes down to kind of that level of service that you know, do I want someone there to help me in a real tangible way.
00:10:40 David Torre
Build out a strategy in my hometown because that's super important to me and I need. I want to know. I want to be educated. I want to have a relationship. I want to be involved and know what's happening in my backyard.
00:10:51 David Torre
Versus just you know, I want a brand I trust. I want ease of use. I want maybe lower cost or whatever other factors you might be important. Either way, it's kind of getting to the same end point. The other thing I would tell you is it's not an either or game either, right. So you can do one at each.
00:11:11 David Torre
Type of sponsoring organization. I've had families that I've worked with where Mom and Dad have one DAF that they sort of Co advise on, but then the plan is to either split that after their death or sometimes.
00:11:26 David Torre
Later.
00:11:27 David Torre
Established dafs for each of their adult children to get used to giving and kind of spurring on family philanthropy. So if you have a child in Ohio and a child in Illinois and a child in New Jersey.
00:11:42 David Torre
Well, you could very easily say OK, mom and Dad have one in their hometown, but we created one at a national organization for the three kids. We're still doing the same activity. It's still the same mechanics.
00:11:54 David Torre
But that that could be very easily be the the reason to go that route.
00:11:57 Nicole Donelson
Yeah, I think that's a great point.
00:11:59
Mm-hmm.
00:12:01 Nicole Donelson
We we've talked before about how sometimes cash is not always the best asset to you. Sometimes there's a better asset and so you know I'd say donor advised funds can sometimes create a path for using a more complex asset and turning it into.
00:12:18 Nicole Donelson
An easier way to give because for the most part, not every nonprofit is capable of accepting more complex asset.
00:12:27 Nicole Donelson
Sets and and that by complex. It may even just be as simple as a gift of.
00:12:31 Nicole Donelson
Stock.
00:12:32 Nicole Donelson
And so that creates A pathway for interested donors to use the asset that's best for them from a tax standpoint, but also then maximize that gift to then make grants to the nonprofits that they know really can only accept cash gifts.
00:12:49 Nicole Donelson
So I think it's a great tool from that perspective. We we do hear the sort of.
00:12:56 Nicole Donelson
OK. You know, do we start a private foundation? Do we start a donor advised fund? And this is maybe in the realm where you're working with a little bit more in terms of establishment and how do you, you know from your perspective how does that conversation go and what are some of the considerations?
00:13:15 David Torre
Yeah, it's it's a great. It's a great point and that and that does come up quite a bit because most people.
00:13:21 David Torre
They've heard of the private foundation. They've, you know, we've seen family foundations out in the community. All you know, most of our lives, we've seen the big, you know, Rockefeller Foundation all the way down to a local family in your hometown. That's, you know, sponsoring Little League or sponsoring the concert in the park or what have you. And so private foundations are sort of the.
00:13:42 David Torre
I don't say they're the default vehicle, but they're sort of the default.
00:13:46 David Torre
Knowledge, in the mind of a lot of donors and then oftentimes the donor advised fund, is put alongside it to show.
00:13:54 David Torre
How similar they are, but there's some definite differences between the.
00:13:58 David Torre
Way they work.
00:14:00 David Torre
Traditionally, the Family Foundation was.
00:14:04 David Torre
Created and controlled by the donor and the family, so they the the buck stopped with them in terms of overhead and administration, they formed a board of directors or board of trustees. They hired a money manager to invest the foundations assets. They hired an accountant to do the accounting work throughout the year. Do the 990 tax filing at the end of the year.
00:14:26 David Torre
They gave out the grants, cut the checks literally, and did all the the leg work, so to speak.
00:14:32 David Torre
The reason I think the donor advised fund has grown so rapidly in in popularity is it does a lot of those same.
00:14:41 David Torre
End kind of functions, but there's some differences in all those sort of overhead type duties. So for example, the donor Advice fund is the it's owned by the sponsoring organization. So it's the sponsoring organization that handles.
00:14:57 David Torre
The admin, the tax work, all the the the paperwork and what have you to get. Keep this thing running. Right. So you pay a fee for that, obviously. But it's usually a much smaller fee than the foundation route where you're actually hiring professionals and overseeing them, right?
00:15:15 David Torre
The flip side of that, though, is your donor advised fund does not have a board of trustees. You have sometimes fairly limited investment choices, if that's important to you, there's some, you know, you're you're giving up some.
00:15:30 David Torre
Flexibility. Maybe in exchange for them taking on some more of that kind of admin responsibility.
00:15:38 David Torre
The other big difference the foundations have what's called a 5% mandatory payout. So every year the private foundation has to show the IRS that they distributed at least the floor of 5% of assets towards a charitable purpose. It could be more.
00:15:56 David Torre
But that's the floor, right? So oftentimes.
00:16:01 David Torre
Clients have a Family Foundation. They don't. Maybe it's it's gone down a generation or two. The assets have kind of, you know, dwindled a bit. Maybe it's not. People aren't in the family are paying as much attention to it anymore. Then they realize, oh goodness, it's Thanksgiving and we haven't done at least 5% of our giving.
00:16:21 David Torre
So we have to get these checks out the door before New Year's Eve, right?
00:16:25 David Torre
The donor advised fund does not have that 5% rule now.
00:16:30 David Torre
Each sponsoring organization might have their own policy on minimum activity, maybe every other year. They want to see at least one grant come out of there or whatever. Maybe has to be a minimum dollar amount, but the the technical requirement meaning from the law, from the IRS, you don't ever have to give.
00:16:50 David Torre
A grant in any given year, so that appeals to some folks when they want to decide. OK, I need my deduction this year. I'm going to fund it with a huge amount.
00:17:00 David Torre
But I don't really know who I want to give to yet. Right. And I'll make those decisions in the years to come.
00:17:06 David Torre
So that's another distinguishing.
00:17:08 David Torre
Sector. The last one I'll throw out there. There's some others, but the last major one I hear the most from donors.
00:17:15 David Torre
Is the the donor advised fund the DAF?
00:17:18 David Torre
Can be well, can be truly anonymous if you name it something anonymous.
00:17:22
True.
00:17:24 David Torre
But Even so, even if you name it, you know with your name or your family name, there is no specific 990 tax filing. 990 is the the tax form, you know like 1040 and all these.
00:17:36 David Torre
So every year the Family Foundation, a private foundation, has to file what's called a 990 tax filing, and those are publicly available. And there's a whole bunch of information on there who's on the board, how much in assets are in there, how much, you know, the grants that came out of there, all types of stuff. Some people don't mind.
00:17:56 David Torre
Some people mind a lot, and so when I have donors that are worried about.
00:18:00 David Torre
00:18:01 David Torre
Privacy.
00:18:04 David Torre
You know, often the go to vehicle if that is a really big concern is the donor advised fund.
00:18:10 Nicole Donelson
So, when I've had some conversations with with individuals that are thinking about one or the other. And again, we've talked about this right? It doesn't have to be mutually exclusive. There are a lot of family foundations that have donor advised funds and they use those as tools.
00:18:25 Nicole Donelson
In different capacities, maybe it's a place that they're giving to organizations that are kind of outside the scope of the Family Foundation. Maybe they're set up as a way to be kind of those training wheels for the next generation. And so they put some funds in the.
00:18:40 Nicole Donelson
There, on occasion, there's that you know, waterfall piece of we need to meet the 5%, but we're making last minute decisions and so there's a portion that gets allocated to a donor advised fund for later, a little more extended time of decision making. I will say another benefit.
00:18:57 David Torre
MHM.
00:19:00 Nicole Donelson
Like donor advised funds, that kind of mirrors foundations, as you can have this succession piece of involving the next Gen. so there is no requirement in terms of limitations. Especially I know at community foundations at least.
00:19:14 Nicole Donelson
That you can continue to have family involved for generation and generation so long as there are advisors and then the foundation can help kind of steward whatever the final donor intent is at the end when there are no more successors in place. So it can be great in terms of aligning those pieces together.
00:19:34 Nicole Donelson
00:19:35 Nicole Donelson
You touched on to, you know, as family foundations go generations.
00:19:42 Nicole Donelson
And it starts to wind down a bit. There's not as much, you know, interest momentum, maybe even the asset sizes, you know, coming down, donor advice funds are a great opportunity for foundations to convert and kind of pass that. Can you just kind of briefly touch on that?
00:20:00 David Torre
Yeah, it it. It's kind of a one way street. But yes, private foundations can essentially dissolve and.
00:20:09 David Torre
The funds can go one way into a donor advised fund or a couple donor advised funds.
00:20:14 David Torre
That's not true going the other way. They're sort of different animals in the zoo. They do similar things. They're treated similarly, but they are technically different kinds of vehicles in, in terms of what the IRS, you know, classification would be. But yes, it's very common for a Family Foundation, especially one that maybe the overhead costs have become.
00:20:15 Nicole Donelson
Correct. Yeah.
00:20:35 David Torre
Prohibitive, right? Maybe Grandma and Grandpa set it up. You know, 60 years ago with X amount of dollars. It's been doing Grant making all along, but fees and costs and all that stuff, it it adds up and maybe the grandkids. Now they're living in different parts of the country.
00:20:54 David Torre
And one solution.
00:20:55 David Torre
is
00:20:56 David Torre
Let's kind of grant everything out of the foundation and dissolve it, and those funds will live on in one or more donor advised funds for them to continue on. There are other options with sort of legacy options for donor advised funds. It's it's gotten more creative over the years, so there's there's, you know.
00:21:16 David Torre
Payouts to charities, right? You could select if you don't have a family member to take over for you, you could tell that the sponsoring organization. Hey, when I'm gone.
00:21:26 David Torre
Give 25% to these 4 charities and it's over. There's others where it's more elongated, kind of an endowment option. There's there's more flexibility, I think, than people realize. But I do think that.
00:21:29 Nicole Donelson
Right.
00:21:41 David Torre
In the context of family philanthropy, there's been some research out there on.
00:21:47 David Torre
A lot of folks want to do family philanthropy with their adult children and their spouses and grandchildren. We want to get all together and do this activity of family, philanthropy and all. And sometimes what happens is you have, I don't know, about you, but sometimes family members have different opinions about things. Yeah, no it.
00:22:05 Nicole Donelson
No.
00:22:07 David Torre
Happens. I read it, I read it in a newspaper. Yeah, and. And you know, you have different generations. You have different geographies, different causes. You want to support all that gets thrown in there.
00:22:08 Nicole Donelson
Not in our family.
00:22:17 David Torre
So there's some thought of, OK, maybe the Family Foundation, the traditional Family Foundation, is the place that our family goes to for those commonly held.
00:22:28 David Torre
Principles and values, right? We as a family stand for.
00:22:33 David Torre
Education or disease eradication or whatever, or feeding the homeless.
00:22:40 David Torre
Good.
00:22:41 David Torre
You know, we all can agree on X and maybe the Family Foundation is reserved for those things that we all can agree on, and then each of us has our own donor advised fund of whatever level makes sense for us to do our individual giving and maybe we all come together and we can share best practices.
00:23:01 David Torre
I can tell you what I've been doing. My donor advised fund. You can tell me what you're doing with yours
00:23:06 David Torre
And I could say great, I would never do that. But I'm so glad you're doing that, right? But but at least sometimes maybe relieve some of that pressure and allows for a little creativity, and you're still accomplishing that goal of a family being philanthropic together. Yeah.
00:23:21 Nicole Donelson
Great. So I think it would be.
00:23:25 Nicole Donelson
You know, I think if we didn't acknowledge the fact that there is some public scrutiny about the growth of the space of foundations and donor advised funds.
00:23:35 Nicole Donelson
And there's been ongoing discussions around potential changes in legislation there. You know, continues to be conversation around what does that look like and and nothing has come to fruition yet, but it's very possible that the landscape of donor advised funds and private.
00:23:55 Nicole Donelson
Foundations could change, you know. Today there's not a required minimum distribution out of a donor advised fund. But there could be some sort of set in the future, right? It's plausible. And I think because there's the mentality that.
00:24:04 David Torre
Sure, sure.
00:24:11 Nicole Donelson
You know, a donor is getting a very significant tax deduction for making a gift that's not yet being distributed to the nonprofits in the community. Now, technically, the sponsoring organization is a nonprofit, but they're not necessarily providing programs and services per say. And so there's.
00:24:32 Nicole Donelson
Some thought by some folks that there should be more activity in the donor advised fund space.
00:24:40 Nicole Donelson
And you know there can be some validity in that area for especially in terms of where you see there's a lot of hands off approach with certain institutions and.
00:24:53 Nicole Donelson
You know, it's tricky to see where this is going to actually land.
00:24:58 David Torre
Mm-hmm.
00:24:59 Nicole Donelson
And so, you know, I know from our perspective, it's about again not, you know, at the advisor level, it likely is a conversation that's happening based on a tax advantage approach, right or the best fit.
00:25:14 Nicole Donelson
Said. And then I think what you said earlier that it's really important to make sure that it's an alignment of a tool with a strategy and that it's not just setting up a tool and ensuring that the individual who's setting it up actually understands.
00:25:22 David Torre
Yes.
00:25:32 Nicole Donelson
Why it's not just a - that there's more behind it in order to make it be more effective? And what does the what does your client need in order to ensure that they are successfully leveraging this tool?
00:25:37 David Torre
Right.
00:25:50 Nicole Donelson
You know, because also the nonprofit sector, I think too sometimes feels a little frustrated because they it's not as clear in terms of how they can access those dollars. But it is another, it is technically just kind of a pocket for the donor to pull from. And it's so, yeah, So what are your thoughts in kind of the space because I.
00:26:10 Nicole Donelson
Know it's a little murky.
00:26:11 David Torre
It is a little murky.
00:26:11 Nicole Donelson
And there's a lot happening in conversation around there.
00:26:16 David Torre
It's hard because everyone has a valid take depending on where they're where they're sitting at the table.
00:26:23 David Torre
Dictates their view on it, right? And so I get the criticism from the nonprofit community, the receivers of the money. Right, so that the grants going somewhere, they're going to the nonprofits.
00:26:35 David Torre
Because, you know, in theory or in practice, I guess, you know, I could create a donor advise fund.
00:26:42 David Torre
I can name it the Maple Tree fund.
00:26:46 David Torre
And set it up with a national sponsor organization that you know, a big brand that we see commercials for every day. And I can say give, you know, $5000 to XYZ Charity whose headquarters is down the street from my house. And when that check arrives, all that nonprofit.
00:27:06 David Torre
Is going to see is the sponsor today the check is going to come from the sponsor organization and the memo line might say.
00:27:13 David Torre
The when I said the Maple tree, the Maple Tree fund and that's.
00:27:17 David Torre
And so in terms of like, how do we credit the donor for this gift, how do we thank them? How do we maybe try to reach out to them and see, you know what, what they if they have other things in mind that they want to do with us, you could set it up where they would never know in reality. And that is a frustrating thing.
00:27:38 David Torre
But I think going back to.
00:27:41 David Torre
It's what the donor wants at the end of the day, our system is set up. There's certain pieces on the chess board, you know, a pawn can only move a certain way and a knight moves a different way and a Bishop moves a different way. I'm not a very good at chess. But you know what I mean? So it's like, OK, I really wish the Bishop could go.
00:28:01 David Torre
A different direction, but guess what? He can't.
00:28:04 David Torre
The rules of the game is that he can only go diagonal on that color. So yes, it's frustrating. I get it, but until the rules are formally changed.
00:28:15 David Torre
We are kind of doing what we have to do with what we have.
00:28:20
Sure.
00:28:20 David Torre
So there is a lot of sort of criticism on the
00:28:28 David Torre
Opacity or the anonymity potential?
00:28:31 David Torre
The what one might consider A+ meaning when I mentioned earlier how there's no publicly available 990 tax.
00:28:38 David Torre
Pulling from the other vantage point, that's a huge negative because I don't know where this money is coming from. If I'm a recipient of it, I don't know who it's attached to. I don't know where it lives. I just know it goes to XYZ sponsoring organization. The other piece of that is.
00:28:56 David Torre
You know.
00:28:57 David Torre
Donor advised funds can only make grants to public charities that are, you know, have their tax ID from the IRS as being public charities. It's a it's kind of a narrow avenue for grant making.
00:29:11 David Torre
Private foundations from the other hand, there's a lot more creativity potentially there. So if you're a donor and you say my strategy is to, you know, push the envelope in some area or do some kind of innovative financing program or some kind of.
00:29:27 David Torre
You know program related investment or something out-of-the-box?
00:29:32 David Torre
I'm not going to tell you to do a donor advised fund as your advisor, because if I know that's important to you and that's the long-range strategy, this tool is not the right one for that strategy. So going back to what you said about the tool versus right, all tools have pluses and minuses, but if you don't know how they fit into the overall picture.
00:29:50 David Torre
Maybe you're not doing the best job for your client, right? Or you're kind of painting them in a.
00:29:56 David Torre
Corner.
00:29:57 David Torre
So I would say there is a lot of pending legislation of various degrees. Who knows what's going to come to pass. We kind of go forward with way the rules are now.
00:30:09 David Torre
And just try to stay nimble in case things change. One aspect though that I do like about the donor advised fund and I think that's why they've become so popular is they are relatively easy to set up.
00:30:22 David Torre
Quick, easy to get them off the ground and funded and easy to get rid of, right? If you don't. So for the clients that are just sort of dipping a toe in the water, they're not quite sure how much they want to devote to charity. They're not quite sure their timeline.
00:30:28 Nicole Donelson
Right, yeah.
00:30:39 David Torre
It's very easy to say. OK, let's start one of these pure experiment. Put a modest amount of money in there. If you hate it, we'll get rid of it and no harm, no foul. If you love it, we can fund it to greater levels. Or we could take what we learn there and maybe do the foundation, or do another vehicle. It's a.
00:30:58 David Torre
8.
00:30:59 David Torre
You know, training ground, so to speak, for donors. Did I answer your question? I lost. I lost my train of thought there for a second. That usually happens.
00:31:07 Nicole Donelson
Yeah, I think you, I think you answered even the questions.
00:31:09 Nicole Donelson
I didn't ask.
00:31:10 Nicole Donelson
Well, David, this has been a great discussion. I hope that people feel like they can walk away better understanding what a donor advised fund is, how it works. Some of the advantages and how that compares to considerations for establishing a private foundation, which is another tool. And the fact that.
00:31:12 David Torre
Yes.
00:31:27 David Torre
Yes.
00:31:29 Nicole Donelson
Again, these are tools that are most effective when they're combined with a strategy.
00:31:36 David Torre
That is the that is the. I think the running theme.
00:31:40 David Torre
To our conversations and to I think both of our practices out there in the real world, not just in podcast land where we are.
00:31:47 David Torre
Is.
00:31:49 David Torre
The strategy, the goals, where are we going? Right. If I tell you I'm going to Philadelphia and I start heading West on what is it, I-10? Is that go to California?
00:32:03 David Torre
Yes, you're gonna say don't go. I-10 is a perfectly valid Rd. but it's no, it's not gonna get me where I'm trying to go. So knowing where you're trying that is that a good metaphor? I don't know. You get it.
00:32:09 Nicole Donelson
Right.
00:32:13 David Torre
Right.
00:32:14 Nicole Donelson
I get it.
00:32:15 David Torre
But without knowing where we're trying to go, what, what? What marks are we trying to hit?
00:32:20 David Torre
We don't. I don't think we want to rush into one vehicle or another without spending some time there and just know that this is a tool in the toolbox. Very popular, very easy to use, but maybe not.
00:32:34 David Torre
Not everyone's going to have one, right?
00:32:35 Nicole Donelson
No.
00:32:36 Nicole Donelson
Yeah, may not be for everyone.
00:32:37 David Torre
Exactly.
00:32:38 Nicole Donelson
Well, what we do know is that you should use Google Maps next time you're going to head to Philadelphia.
00:32:45 David Torre
It's a nice place. Have you been?
00:32:46 David Torre
To Philadelphia, no.
00:32:47 David Torre
I haven't. They have the Liberty bell.
00:32:47 Nicole Donelson
Have.
00:32:49 David Torre
Have you? Have you heard of that?
00:32:51 Nicole Donelson
I do. I have heard of that.
00:32:52 David Torre
It's in Philadelphia and they have other things there. There are some really nice museums.
00:32:58 David Torre
We should do an episode on the Barnes Museum. That's a planned giving story. That's a very interesting one.
00:33:03 Nicole Donelson
OK, OK.
00:33:04 David Torre
Yeah, maybe we'll maybe that it's a little.
00:33:06 David Torre
It's a little controversial, but maybe we'll mix it up a little in the future.
00:33:09 Nicole Donelson
Ohh controversial future episodes. OK, well thank you so much for your time, David this.
00:33:11 David Torre
Yeah.
00:33:13 David Torre

00:33:15 Nicole Donelson
Has been great.
00:33:16 David Torre
Glad to be here and I look forward to navigating some more in the future.
00:33:19 Nicole Donelson
Perfect.
00:33:20 David Torre
Thank you.
00:33:22 Mark Brewer
Thank you for listening to the podcast First You Talk. As an engaged listener of this show, we encourage you to check out our podcast website at cffound.org/podcast to learn more about the complex issue.
00:33:39 Marek Brewer
There you'll find more context to the voices that you've heard today, links to any supporting materials mentioned during the episode, and resources to help you explore additional perspectives to draw a fuller picture of the issue at.
00:33:51 Mark Brewer
Hand.
00:33:53 Mark Brewer
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