The Chronicle of Philanthropy, an independent news organization dedicated to covering all things charitable, recently released its annual report outlining the state of charitable giving here in the U.S. and ranking the nation's top 400 charities in terms of total private contributions.
According to the report, not only did private donations to the nation's top 400 charities increase by 7 percent in 2015, but for the first time ever, an entity known as a donor-advised fund occupied the top spot by taking in over $4.6 billion.
What exactly is a donor-advised fund?
Donor-advised funds are essentially accounts managed by wealth management companies that enable people to set aside money for charity. While a donor who makes a donation to their fund can claim the tax benefit immediately, there is no requirement that the money they place into the donor-advised fund be dispersed immediately.
Indeed, these funds, which are viewed as charitable entities in the eyes of the law, are permitted to hold onto the money on the client's behalf indefinitely, making charitable donations at their request.
While the donor relinquishes ownership of any funds upon their deposit, they can keep them there for decades and even bequeath control of the fund to their heirs via an estate plan.
Which donor-advised fund topped the list?
According to the Chronicle of Philanthropy's report, Fidelity Charitable Gift Fund was number one in private donations for 2015, besting United Way Worldwide for the top spot. Indeed, two other donor-advised funds ranked in the top 10, including Schwab Charitable Fund and the National Christian Foundation.
What are the views on donor-advised funds?
Critics of donor-advised funds argue that they unnecessarily delay much-needed funds for charities and expend sizeable amounts of money on fees to wealth management companies rather than worthwhile causes.
Proponents of donor-advised funds counter that their enhanced flexibility actually encourages more giving and that charities will get the funds eventually.
It is certainly fascinating to see how the charitable landscape is continuing to evolve.
If you would like to learn more about charitable donations or estate planning in general, consider speaking with a skilled legal professional.