By Lawson Bader and Peter Lipsett

Remember the phrase “the good old days?” It’s one that becomes more prevalent as one moves up the aging ladder.

Ironically, and perhaps sadly, what was once a wistful observation about a previous era when [insert your favorite romanticized idealized action or description or hope or iconic landmark here], it now marks a time when we could leave the house and not think, “Darn, I forgot my mask.”

The Donor-Advised Fund

The “good old days” of donor-advised funds has, on one level, remained just that for decades.

The model is straightforward: donors contribute cash, securities or other property to the DAF provider and in return they are given an immediate tax deduction and a “virtual” account where they have advisory privileges to make grant requests to qualified 501(c)(3) public charities. The donor-advisor also has the option to invest the funds so the account grows to increase the impact to the eventual benefiting charities (but not the advisor’s pocket!).

In addition to the “how,” the “why” has also remained fixed. Compared with private foundations, DAF account holders have greater freedom to make grants according to their own time frame and charitable goals. It is up to the donor-advisor to determine how much, when, and to what group.

While it’s true that community foundations have more discretion to direct DAF account funds to meet an established community goal or need, the reality is – whether working with a commercial, community, or mission-driven organization – the account holder is always in the strategic driver’s seat. And that has struck a nerve, in a good way.

Howard Husock, in a recent joint study between the Philanthropy Roundtable and American Enterprise Institute, reported on the explosive popularity of DAF accounts. Total unique accounts number nearly 800,000, with collective assets in those accounts exceeding $120 billion. And that was only through 2018. Given how active donors have been the last few years, I’ve no doubt those numbers have escalated much further.

Trouble in Paradise

Now, cue the “trouble in paradise” music. Just as in society at large, there are fractures among the DAF community. The unfortunate nastiness of our divisive political culture has reached its talons into the larger charitable world. The “good old days” may no longer be just that, especially for many donor-advisors who have happily been using DAF accounts sponsored by national, commercial donor-advised fund such as Fidelity Charitable or the Goldman Sachs Philanthropy Fund.

For the last sixteen months, it appears these commercial banks are succumbing to outside groups, notably the Southern Poverty Law Center, to cease supporting legal charities that, in their opinion, “spew hate.”

And it has worked. Some of these larger DAF providers have slowed the process or outright denied grant requests to, among others, the National Rifle Association Foundation, Project Veritas, National Review Institute, and several conservative, Catholic pro-life groups.

How do we know this? Because these account holders have rolled their accounts over to my own organization, DonorsTrust. What began as a trickle in 2020 has become a flooding refrain to our email inboxes and office phones. David Wills from National Christian Foundation (NCF), one of the largest DAF providers in the United States, informed me that NCF is experiencing a similar increase in new accounts. I’m afraid the trend of these larger DAF providers giving in to the pressure to be politically correct will continue.

Donor Intent Is Donor Freedom

Now, I am not saying these commercial providers (and others so inclined) lack the right to change their policies and deny grants. They can do that. DonorsTrust denies grant requests, too. We look more broadly at an organization’s percentage of government funding or whether it seeks to expand the size and scope of government (as opposed to encouraging private actors and civic institutions to address societal issues) rather than diving into the details or mission of prospective grantees.

I am also not saying that organizations mentioned above are ones that I would or would not personally support. However, I am also not passing judgment on whether those groups are effective or even relevant. Those are all beside the point. The point is, from a donor-intent perspective, I am appalled. As Fidelity and others continue to squeeze the ability of account holders to support charities that align with those same clients’ motivations, beliefs or strategies, they sequester funds for purposes that are likely in direct opposition of their intention.

Independent philanthropic freedom is critical in a free society. We can debate how institutional philanthropy may be recalcitrant and bureaucratic, how donors can tie the hands of creative non-profits trying to  outright change society and not merely solve a temporary problem, and how new charitable tools or structures might be needed to move more private dollars into the hands of the charitable community. Those are all issues worth discussing, but another time.

Making the Switch

Rolling over a donor-advised fund from one provider to another is a simple process. In fact, it is no more difficult than requesting a grant to any non-profit. That’s because all DAF providers are registered 501(c)(3) public charities themselves. Here’s the simple process to rollover your fund to DonorsTrust:

• Determine the new provider to whom you wish to move your funds. If you support the principles of limited government, personal responsibility, and free enterprise, you’ll find yourself well aligned with DonorsTrust. (Click here to get your free donor prospectus.)
• Open a fund with the new provider. Opening a fund is a simple process – as you already know if you have an existing DAF! (Click here to access the DonorsTrust application.)
• Request a grant to the new provider. Follow the same process you would as if you were giving to one of your traditional grantees. DAF providers regularly make grants to each other for a variety or reasons. It’s quite likely your provider has made a gift to DonorsTrust before. The amount is up to you. You can open a new fund with the minimum of $10,000 or you can roll over the full balance of your existing fund if you’re ready. In the memo of the grant, put your new fund name.
• Close your old fund. If you are completely rolling over your account, you can close your old account. Make sure to download a copy of your grant-making history for your records. That can be helpful information to share with the new provider as it provides an accurate snapshot of your donor intent.

Working with a philanthropic partner that shares your principles makes giving easier for you and simply more enjoyable. If you’ve felt the same pain and frustration that so many of our new donor advisors have with your existing donor-advised fund, consider rolling over your account to a provider with a shared vision – DonorsTrust.

During Freedom Fest, we’ll explore other reasons why a donor-advised fund might be helpful to your giving. In our session titled “Mitigate Biden’s Tax Atrocities with Charitable Giving” on Thursday at 2:10 p.m. in the Rushmore E room, we’ll look at how a DAF can soften the tax blow expected to come from pending changes to the tax code. In “Smart Strategies to Engage Family in Free-Market Philanthropy” on Saturday at 2:10 p.m. in Room 102, we’ll look at ways a DAF can help you pass on a charitable legacy to future generations. See you at FreedomFest July 21-24, Rapid City, South Dakota.