The CEO’s Guide to Giving: Building a Donor-Advised Fund

From creating a legacy and introducing family members to philanthropy to ensuring that donations are used effectively, there are lots of reasons that families associated with successful businesses are opting to take an active role in giving back. In this three-part series, Chief Executive spoke with philanthropic business leaders to gain their insights on supporting foundations, private foundations and donor-advised funds. This is Part III.

Michael Kay, former CEO of LSG Sky Chefs, walked away with a significant payout when his company was sold to private equity investors in 2000. Seeking to develop a more sophisticated estate plan, Kay met with his lawyer, who recommended that he consider a donor-advised fund (DAF) at the Community Foundation for Greater Atlanta.

An increasingly popular philanthropic vehicle in recent years, DAFs are philanthropic enterprises typically hosted by financial companies like Fidelity Investments or university and community foundations into which donors can deposit cash, appreciated securities or other assets to be distributed to charities over time.

Kay liked the relief from administrative tasks that the Atlanta community foundation DAF offered.

“One of the things we’ve found through the community foundation is that we can join arms with other philanthropists. Together our efforts make a bigger impact than just being individual donors.”

“There was someone else to do all the homework about potential beneficiaries,” he says, explaining that the DAF helped identify and screen potential causes that fit his family’s charitable goals. “My wife and I became interested in after-school programming for disaffected youth. I could say, ‘Surface three foundations that do a first-rate job in this regard and I would like to go meet them with my wife.’”

He was also able to involve his four children. As the name implies, DAFs place donors in an advisory role—they make recommendations but don’t have the absolute control over grant-making that a private foundation offers. Donors and family members, however, can serve in that advisory capacity, as is the case for the Kay’s children.

Barbara Bing Pliner, who got involved in philanthropy in a big way after selling her Southern lifestyle and media company in 2012, is another fan of the Atlanta community foundation.

“One of the things we have found through the community foundation is that we can join arms with other philanthropists,” says Pliner, whose particular passion is nonprofit programs that teach ballet skills to girls from low-income families. “Together our efforts make a bigger impact than just being individual donors.”

Because there are no distribution requirement for DAFs, the structure has come under fire from critics who view them as a place people seeking a tax deduction can park assets indefinitely. However, the overall distribution rate of DAFs was a healthy 21.5 percent in 2013, suggesting that most are serving their charitable purpose.

That figure doesn’t surprise Alicia Philipp, president of the Atlanta foundation, who says the structure has opened a gateway to the philanthropic world in her community.

“The beauty of a donor-advised fund is that if people create one and get engaged, they become raging philanthropists,” says Philipp. “They find out what’s happening in their communities. You not only get the money working in the community; you also get the people engaged in the community. That’s the secret sauce.”

Read more:
Part I: The CEO’s Guide to Giving: Working to Solve World Problems
Part II: The CEO’s Guide to Giving: How a Hotel Industry President Created a Private Foundation

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William J. Holstein
William J. Holstein is a journalist, consultant and speaker. He is the author of, "The Next American Economy: Blueprint For A Sustainable Recovery." For more of his work, visit www.williamjholstein.com.

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