Libertas (Issue 40.1 - Winter 2019)

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Are Donor Advised Funds Safe for Conservatives? An Interview with Kimberly Begg, Esq. By Jason Barbour, Director of Development

Libertas: Donor advised funds are the fastest-growing recipient of charitable dollars in the United States. Some of Young America’s Foundation’s most generous supporters give through donor advised funds—and many more are incorporating donor advised funds into their estate plans. At the same time, many independent advisors raise serious donor intent concerns about this popular giving vehicle. As a Young America’s Foundation vice president and general counsel, you served as director of planned giving, working closely with supporters and their legal and financial advisors, for nearly 15 years. In your experience, should conservatives be cautious about giving through donor advised funds? ————————————————————

Kimberly: Yes. Donor advised funds are attractive financial products for institutions that administer them, generating significant income and fees on assets that can remain under management in perpetuity. Although many conservatives have used donor advised funds to successfully advance their ideas, reliance on these unique giving vehicles could lead to gross violations of donor intent and the hijacking of millions of dollars intended for conservative causes. Libertas: How? What is a donor advised fund? ————————————————————

Kimberly: A donor advised fund is a separately held account that is maintained, operated, and controlled by a 501(c)(3) tax-exempt organization, called a


Young America’s Foundation | Libertas | Winter 2019

sponsoring organization, that must use the assets for tax-exempt purposes. Individuals give a tax-deductible gift to a donor advised fund (and if they give appreciated stock, they avoid capital gains tax) and become “advisors” to the account, instructing sponsoring organizations to send gifts to non-profit organizations at will. Sponsoring organizations handle all of the paperwork. Gift-giving is easy, and it can be anonymous. Libertas: That all sounds great. What is the problem? ————————————————————

Kimberly: You don’t own “your” donor advised fund! When you give to a donor advised fund, you relinquish control of your assets. Period. You may have a great experience with the sponsoring organization during your life. The sponsoring organization may never refuse to honor your intent during your life—after all, the goal is to encourage you to continue to give, currently and through your estate—but your lack of ownership of the fund may jeopardize your clearlystated wishes, especially once you are no longer able to monitor use of your donated assets. Nearly all sponsoring organizations market donor advised funds as estate planning vehicles, through which to either make “pass through” gifts or to build “intergenerational philanthropy.” To make “pass through” gifts, advisors bequeath assets to a donor advised fund and, after gifts are reduced by a fee,

they are considered for distribution per advisors’ wishes. Increasingly, sponsoring organizations encourage advisors to consider their donor advised funds as a means of continuing a family tradition of philanthropy. Many conservatives—who wish to pass on to their heirs a spirit of entrepreneurship, not entitlement— question whether it is wise to establish a tradition of future generations spending money that is earned and set aside by older generations. Libertas: Do you have an example of a sponsoring organization refusing to honor an advisor’s wishes? ————————————————————

Kimberly: Yes. A few years ago, a sponsoring organization told Young America’s Foundation we did not “have a seat at the table” for discussions regarding a gift intended for Young America’s Foundation upon the death of a longtime supporter. Legally speaking, the sponsoring organization was correct. But we persisted—for more than a year—in attempting to have the intent of our supporter honored because his wishes were clear. It was not until United States Attorneys General Ed Meese and John Ashcroft encouraged the sponsoring organization to honor our supporter’s intent that a full and immediate distribution was made. Libertas: Why was the sponsoring organization in your example reluctant to honor the donor’s intent? ————————————————————

Kimberly: This gift involved a substantial amount of money, capable of generating significant income and fees. Institutions rarely act against their self-interest, absent external influences. In this case, there was no legal obligation for the sponsoring organization to honor the gift, and there was no fear of our deceased supporter objecting to his intent not being honored. The sponsoring organization was a community foundation created to benefit a particular geographic area—not to advance our supporter’s conservative ideas. It is a mistake to think an institution with no history of supporting conservative ideas

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