By Cynthia Strauss, Fidelity Charitable^®

The following was published earlier this year in Exponent Philanthropy’s Outsized Impact, a first-of-its-kind report on trends shaping philanthropy with few or no staff. 

I’ve always found it apt when philanthropists use the term “journey” to describe their giving. To me, the word encompasses the stops, starts and, most important, the learning that accompanies a philanthropic lifetime—the side trips and experiences along the way that so often have deep and significant meaning for the donor. Hopefully, your own philanthropic journey represents a unique and continually rich exploration.

There are multiple giving tools available 

Fortunately, there are numerous vehicles available to help you reach your charitable destination as easily, effectively, and efficiently as possible. Until quite recently, foundations and charitable trusts were the most widely employed vehicles for individuals or families with several million or more charitable dollars to dedicate. For more and more today, however, donor-advised funds (DAFs) are being added to the mix.

As DAF programs have grown in number, so have the variety and sophistication of their offerings. Many DAF programs have in-house experts to aid giving that requires an advanced level of support—for example, donating complex assets like private or restricted stock, international giving, or impact investing. Donors can also leverage the DAF program’s expertise in supporting donors as they shift to a more specialized charitable focus or adopt an entirely new direction.

No one charitable vehicle is inherently better than another. What I am seeing, though, is more families and individuals proactively using a variety of vehicles to best serve their evolving charitable journey.

DAFs as a complement to trusts and foundations   

Another couple we work with operates a foundation focused on international giving in Africa. This pair is very personally involved in the cause, and together they make many direct grants to individuals and organizations; overall, their philanthropic style is better suited to the foundation structure. Even so, they have established an active and growing donor-advised fund for giving outside their foundation’s mission. At the same time, they’ve established accounts for their two college-aged children, to seed and cultivate their independent philanthropic interests.

Whereas private foundations offer maximum control of charitable mission and of how charitable assets are managed and granted, their ongoing maintenance can prove burdensome for some. A couple we worked with recently—a husband and wife in their early 70s, with a 12-year-old family foundation—was in the process of transferring control of the foundation to their grown children. All three children were themselves active philanthropists, but over time each had developed different charitable causes and interests. With busy lives, the children did not want to serve on the foundation’s board or engage in the responsibilities required to run the foundation. So the parents disbanded the foundation and transferred the assets equally to four separate DAF accounts—one for the parents and one for each child. In turn, the grown children named their children as successors on their DAF accounts to continue the family’s philanthropic legacy.

Donor-advised funds also can work hand-in-hand with charitable trusts. We recently helped a family set up three charitable lead trusts (CLTs) for their adult children. The donors designated a donor-advised fund as the charitable beneficiary of each trust, and each child was named an advisor to his/her respective DAF. At the end of the trust’s term, each DAF will receive the balance of funds from the CLT. This approach proved to be an elegant solution. The parents shared their passion for philanthropy by enabling the children to recommend grants from the DAF. The DAF also offered the children the flexibility to vary the charities supported and the amounts of the grant recommendations over time, without revising the trust’s legal documents.

No one-size-fits-all approach to giving   

The long and short of it is that the old “one size fits all” model—choosing one or another vehicle from which to conduct all of your charitable activity for life—is not always the best solution. More and more, dedicated philanthropists are finding that a combination of giving vehicles can be used to best fit the direction of the unique journey toward their charitable goals.

Related resources

The Universe of Giving Structures
Strategic Uses of Donor Advised Funds
The Best of Both Worlds: Using Private Foundations and Donor Advised Funds

Cynthia Strauss is the director of research for Fidelity Charitable®, an independent public charity that has helped donors support more than 180,000 nonprofit organizations with over $17 billion in grants. The mission of the organization is to further the American tradition of philanthropy by providing programs that make charitable giving simple and effective. 686273.1.0