Donor-Advised Funds:
A Simple Tool for Family Philanthropy

A Case Study (part 1 of 2)

By Terry Green, CFP ®, AIF ® and Phil Tobin

As usual, it was a busy morning at the Steve and Susan Hale household. Here, their three children are clearly the center of life, and Steve and Susan work hard to make sure it stays that way.

His father, George, also works hard to make sure it stays that way, and he has employed a creative method to see that it does. George calls it the George and Mary Hale Family “Make-A-Difference” Fund.

It's a simple way for the family to get together and discuss the importance of philanthropy. In the financial world this fund is known as a Donor Advised Fund. The purpose of the Fund is to engage their children in the value of giving, but they also have bigger plans for creating a lasting legacy.

George and wife Mary like the simplicity that their Fund offers. Here is how they engage the family: each child above the age of 10 children can recommend a grant from the “Make-A-Difference” Fund in the amount of $25 for each year since their birth. For example, at 10 years old Greta has $250 available to work with. Greta researches a charity, and once she gathers the information, she brings back what she has learned to discuss with the family. The parents and grandparents provide guidance and oversight.

"You want to give them something that has meaning," Mary said. The foundation offers parents and grandparents a way to demonstrate the power of generosity. "As grandparents I'd like to inspire my family’s philanthropy, and the Donor Advised Fund is a teachable tool for my family without giving them an administrative burden," he said. He said the projects inspired by and initiated through his family’s Fund allow him to teach his grandchildren a simple but profound message. "You can learn about yourself by giving to others," he said.

Many experts believe that an early childhood experience in philanthropy will have a strong influence on how charitable and philanthropic an individual will be later in life. Sometimes, parents are worried that giving too much money to their children can hinder their ability to learn essential life lessons. Parents may be concerned that their legacy will be squandered or that their kids may fall under the influence of people who will take advantage of their beneficence. They also might fear that their children will lose the drive to succeed if they suddenly receive a large inheritance.

Donor Advised Funds provide a number of benefits:

Next issue will discuss more about the specifics of Donor Advised Funds such as: What are they? How do they work? Who offers them? How do they differ?

Terry Green, CFP ®, AIF ® is an independent, fee-only financial planner with Blue Water Capital Management. He can be contacted at (858) 552-1488 or terry@sandiegofeeonly.com. Philip T. Tobin is the President of American Endowment Foundation (AEF). Their website is www.aefonline.org.

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