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Donor advised funds don't have a requirement on any cash outflows and charitable outcomes at any particular time, just that the funds eventually have to be allo

Donor advised funds don't have a requirement on any cash outflows and charitable outcomes at any particular time, just that the funds eventually have to be allocated to charitable causes. They can also pay management fees on their capital. You can own the investment fund that is managing its capital. You can then bleed money out through those management fees while only paying capital gains on money when you take a specific amount out as carried interest, avoiding the majority of your capital gains liability on most transactions with most of your capital. I forget where I originally heard this from, but they claimed to have this setup and claimed it was common, and I have since ran it by multiple CPAs and have not yet gotten back an argument for specifically how this would be illegal.

lazerpants 8y ago
I work with lots of donors and their DAFs. Most people who use DAFs (from my experience) are just trying to smooth out their charitable giving so that they don't have to pay taxes during windfall years. They want all the money to go to charity but don't want to donate a huge amount all at once, especially given that many smaller charities are not capable of absorbing/utilizing windfall amounts, or they want to do research on charities before donating.
URSpider94 8y ago
I don’t believe that you, as the donor, could maintain control of the DAF - in other words, contributing to a fund from which you derived management fees. I have never heard of this being done, most DAF’s are run by independent foundations or by special wings of investment funds. So, it’s not that the donors are getting kickbacks in the form of management fees. It’s simply that people are upset that money is going into these funds and isn’t instantly available to charities. Never mind that many large charities like hospitals and universities run their own endowments that invest contributions.

lazerpants 8y ago

I work with lots of donors and their DAFs. Most people who use DAFs (from my experience) are just trying to smooth out their charitable giving so that they don't have to pay taxes during windfall years. They want all the money to go to charity but don't want to donate a huge amount all at once, especially given that many smaller charities are not capable of absorbing/utilizing windfall amounts, or they want to do research on charities before donating.

URSpider94 8y ago

I don’t believe that you, as the donor, could maintain control of the DAF - in other words, contributing to a fund from which you derived management fees. I have never heard of this being done, most DAF’s are run by independent foundations or by special wings of investment funds. So, it’s not that the donors are getting kickbacks in the form of management fees. It’s simply that people are upset that money is going into these funds and isn’t instantly available to charities. Never mind that many large charities like hospitals and universities run their own endowments that invest contributions.