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Giving strategies shift in this economy

May 22, 2009

I read two recent articles on giving mechanisms in this down economy – I hope that some of our South Asian philanthropist readers will look into these resources for their own giving.

Sendhil directed me to this New York Times article on donors’ strategies to change their giving due to the economy.  The article describes three strategies that large donors use if their portfolios have tanked, but they still want to give:  conversion, deferral and triage.

  1. Conversion is “a strategy for those who have a multiyear pledge to an endowment of a charity that needs operating cash now” – donors honor their pledge, but do a written agreement to direct the funds to operating funds rather than endowment.
  2. Deferral is simply delaying the gift or pledge – perhaps paying the large pledge over 7 years instead of 5.
  3. Triage is what it sounds like: “separating out charities that will not survive without your support, and trying to assess whether they are worth saving.”

One wealthy couple featured in the article said, “This is the time people need the money, now when things are so bad,” Mr. Briggs said, “and whether you are feeling poorer yourself doesn’t matter so much as when money was really needed you were there to help.”  We like that attitude here at SAPP!

And this Wall Street Journal article from last month points out that more donors are shifting their assets from private foundations to donor-advised funds.  Private foundations have higher overhead and back-office support costs, while donor-advised funds are managed by professional community foundations or wealth management firms.   Here’s an explanation:

Donor-advised funds can cost thousands of dollars less to maintain than foundations — a factor that has taken on increased significance as many foundations’ assets have plunged.

The funds, which operate as independent charities, have other advantages besides allowing donors to take an immediate tax deduction after making contributions. Donors advise the fund on where the grants should go, but the funds don’t have to make distributions as often as a foundation would. Donors can also give many types of assets — including cash, securities and even art — depending on the fund’s specific rules.

Some places you can look to start your own donor-advised fund are: 

(Hat tip to TaxProfBlog.)

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