Comparison with a Charitable Gift Fund

The past decade has seen an explosion in the number of charities offering some version of an advised fund, based on the original community foundation model started in the 1930s. Reportedly, more than 60 similar gift funds exist, and more are being created. Mutual fund companies, brokerage firms, and large, sophisticated nonprofits and universities are among the many providers of charitable gift funds.

While these funds are attractive for some donors, people considering charitable gift funds should ask themselves the following questions to identify the best giving vehicle.

	What level of personal service do I want now, or might I potentially need in the future?
	If you are looking primarily for immediate convenience -- a sort of charitable checking account -- then a gift fund or a fund sponsored by a charitable gift fund might be appropriate. But if you want access to more guidance in determining where to give, how to give, or what the community needs, The Dallas Foundation offers a wider range of services. Personal service is important to many people. Toll-free numbers and online access are helpful, but you might prefer in-person contact. Some providers may not have the staff to offer personal attention. One large donor advised fund program, for example, had 1,400 donors, $195 million in assets, and two people on its grants staff, at the time of a 2000 business magazine article.
	What types of assets do I want to give, and how much?
	Depending on the program, there may be limits on the kinds of assets that can be used, or minimum fund requirements. For example, many programs will accept only gifts of cash and publicly traded stock. The Dallas Foundation accepts a wide range of assets. Fund minimums. Some programs, particularly those run by large charities as an adjunct to their main work, have very high minimums to open, as high as $1 million for one university-run fund. The Dallas Foundation generally requires $25,000 to open a fund.
	What are my investment choices for the fund?
	Charitable gift funds might offer four or five investment options, typically mutual funds in a single fund family. The Dallas Foundation selects its own managers but allows donors to select from a range of different investment mixes, from growth to capital preservation. The Foundation also has cooperative arrangements with the American Funds and Merrill Lynch Trust Company that allow contributions to be invested in mutual funds offered by these two companies. The Dallas Foundation will allow a private investment manager to continue to manage assets of $1 million or more contributed to the Foundation, as long as the outside manager passes muster under the Foundation's investment policy.
	What will it cost me to use a particular fund?
	The administrative and investment fees charged by the gift funds vary widely -- anywhere from 0.65% to nearly 4% in some funds. The Dallas Foundation's combined administrative and investment fees start at about 1.4%, and the administrative fee declines as the fund grows larger. Also keep in mind that some advised funds opened by nontraditional providers may require that the donor grant a certain percentage of the fund to the charity annually, which you might regard as an additional "cost."
	Might I want to make gifts for charitable purposes to non-registered charities or international groups, or to groups whose work conflicts with the philosophy of the particular charitable gift fund provider?
	Although most charitable gifts are devoted to the 1,100,000-plus registered 501(c)(3) charities in the U.S., you might have additional charitable interests. Some churches, for example, are not registered with the IRS. The Dallas Foundation can pay a grant to a non-501(c)(3) organization, including an international group, so long as our staff confirms and documents that the grant is for a charitable purpose. Charitable gift funds and nontraditional providers may also be legally permitted to grant to non-501(c)(3) entities, but they may have policies prohibiting grants to non-registered or foreign charities because of the lack of staff to research the requests. For philosophical or religious reasons, some charitable gift funds may limit the kinds of charities to which grants may be made. A fund sponsored by a religious denomination, for example, might permit grants only to churches or ministries within that denomination. A donor considering a fund with one of these providers should carefully review the provider's grantmaking policies to ensure that the donor's and provider's giving practices are compatible.

A Benefits Comparison Chart

Comparison of The Dallas Foundation and Commercial Donor Advised Funds