Giving vehicles and supports

Ruth Selby:

This is Effective Philanthropy for Advisors. Today we're talking about giving vehicles and structures. This is our fifth session in a six-part series, so thank you for joining us. I'll just go over the agenda for today and then pass the microphone to our panelists. Today, we're going to be introducing ourselves and our organizations. We'll talk about why our topic is important. You, as an advisor, already know this topic is important. That's why you're here, but we'll go over some of the reasons our centers find it so important to be knowledgeable on these issues.

We'll go over some of our resources and introduction to the toolkit. We'll talk about giving vehicles and structures and we'll save time at the end for Q&A and a wrap-up. We also really want to take advantage of the chat during this session, so if you have questions in real-time, please put them in the chat or in the Q&A function so that we can answer those and ask our panelists to take a break if the question is really relevant for that moment. We will also take time at the end to answer any lingering questions. Now I would like to pass the microphone to Dave Estanislau from DAFgiving360™. Dave is going to introduce us to this material and pass the microphone, then, to our panelists. Dave, over to you.

Davide Estanislau:

Thank you so much. Hello everyone and thank you for being here today. I'm thrilled to welcome you to our advisor webinar education series in partnership with the Stanford Center on Philanthropy and Civil Society. So Stanford PACS. My name is Davide Estanislau. I'm a senior manager on the charitable consulting team here with DAFgiving360. And personally in my role, I partner with advisors to deliver innovative solutions that help integrate charitable planning into the wealth management process, which really helps with clients maximizing the impact of their giving. For those of you who may not be familiar with DAFgiving360, we are an independent 501(c)(3) public charity with a mission to increase charitable giving in the United States. DAFgiving360 does this by providing a tax-smart and simple giving solution to donors and financial advisors.

Today's session will focus on giving vehicles and structures. And before we dive in, really quick housekeeping note. If you are eligible to gain CE credit for the participating in today's webinar, please be sure you stay with us for at least 50 minutes, that's 5-0, to qualify for these credits. Additionally, I want to highlight resources available through DAFgiving360, all of which are accessible on our public website. These tools are designed specifically for advisors looking to assist clients in achieving and surpassing their charitable giving goals. DAFgiving360 has several key resources available to support in helping clients integrate charitable giving into your client's wealth planning. Really want to highlight a standout resource is the DAFgiving360 Giving Guide, which supports donors and advisors in developing a more intentional charitable strategy, regardless of where they are in their philanthropic journey. The Giving Guide is one of the most widely used resources. It's a flexible, easy to use tool that helps donors and advisors really build a thoughtful, charitable strategy at any stage of the philanthropic journey.

Understanding a donor's specific passions and goals is often the best place to start. It's about helping them find their focus. What motivates their giving? What do they want to change? DAFgiving360 has also created a companion advisor guide that assists advisors and client conversations surrounding their philanthropic journey. From there, donors can explore organizations aligned with their goals. Tools like Candid and Charity Navigator are excellent resources for evaluating nonprofits. The Giving Guide also includes guidance on topics such as international giving and intergenerational engagement, helping families plan across generations and geographies. So today we are joined by Vera Michalchik, Director of Philanthropy Research and Education at Stanford PACS, Ruth Selby, Program and Education Manager at Stanford PACS. And last but not least, Micah McElroy, Associate Director of Research for the Effective Philanthropy Learning Initiative at Stanford PACS. So with that, I'm happy to turn it over to Vera.

Vera Michalchik:

Right. And I just want to thank you on behalf of all of us here at Stanford that have really thoroughly enjoyed working with the team at DAFgiving360. And yes, my colleague, Micah, will be taking the lead in presentation right now. So take it away Micah.

Micah McElroy:

Great, well thank you both for the introduction. My name is Micah. I'm a researcher at the Stanford Center on Philanthropy and Civil Society. So mostly what that means is that I get to really study how people in philanthropy actually think about and practice philanthropic giving, with the goal of using those insights to inform more effective educational programs. And Stanford PACS, if you're not familiar, is a research center as well as a hub that connects scholars and practitioners, located at Stanford University. And much of our work works to ensure that philanthropy and civil society are broadly better understood. We want to encourage people in philanthropy to also use their resources in a careful and intentional manner, in a way that's likelier to achieve their goals, while also respecting the multiplicity of ways in which we might think about civil society and what it means to do good.

And Stanford Social Innovation Review is perhaps one of the more well-known ways, in which we combine some of our research findings as well as insights from practitioners. If you don't have a subscription, I'd highly encourage you to pick one up. So been published since 2010 and it's now distributed in six languages. The Stanford Social Innovation Review also host a number of relevant events and convenings for people in the social sector that I would encourage you to also look into. And I mentioned that we're at Stanford PACS, but we're also part of a team within PACS called the Effective Philanthropy Learning Initiative. And you can see the three core members of the team here who are also in our little blue squares up in Zoom. We were founded back in 2012, and Paul Brest, who is the Faculty Co-Director of our lab, still oversees much of our work, but unfortunately is not with us today, but encourage you to learn more about some of his work and I'll actually be talking about some of his research in a moment.

And at EPLI, we really approach our work from a interdisciplinary perspective. So we combine insights from philanthropy and the social sciences with the problem solving methods of design thinking. Our goal is to accelerate the learning process for everyone who's involved in the philanthropic ecosystem by developing research, content and practical tools that translate all these complex ideas into actually actionable strategies. So what do we mean by effective philanthropy? It's a term that can feel pretty abstract, but at its core, it's about moving beyond simply writing checks.

So effective philanthropists are, first and foremost, intentional. Through our research we've identified these five key attributes that define this intentional approach, and that includes being thoughtful. So taking the time to understand one's values and the issues that a donor cares about. Effective philanthropists are clear about the goals that they want to achieve. They are committed to their chosen path, understanding that meaningful change often takes time and can be a windy path. They are also learning-oriented, constantly seeking feedback and adapting their strategies in light of that feedback. And finally, they are respectful of the communities and organizations that they seek to support and partner with.

Now this framework of effective philanthropy is arguably more relevant now than ever before because philanthropy in the advisory world is really at this critical inflection point. I'm sure some of you are familiar with this, but through 2048, an estimated $124 trillion will be transferred from one generation to the next, which is a really unprecedented movement of capital. And for the financial advisors and wealth managers who steward these assets, this transition represents both a really significant opportunity as well as one that has profound levels of risk. So the risk is one of attrition. Research indicates that between 38% and 60% of assets are at risk when wealth passes to younger investors, potentially jeopardizing nearly $70 trillion in assets under management for firms that fail to engage this next generation on their terms and according to their values.

And this generational transfer is not merely a financial transaction. And we can go ahead to the next slide here. It's also a transfer of value. So a defining characteristic of this emerging client base, this next generation, is a deep and abiding interest in social impact. And data reveals a real striking disconnect, a chasm between the desires of clients and the readiness of advisors to meet those desires. While 87% of affluent investors express a clear desire to make charitable impact, only 6% report receiving philanthropic advice from their financial advisors. And compounding this reality, only 5% of advisors feel very confident in their ability to provide guidance on philanthropy. So this gap represents one of the single greatest vulnerabilities for the advisory practice today, but it also points us towards the path towards future growth and client retention.

We can go ahead to the next slide there. And I do want to underline that trying to address this gap, this chasm, can yield significant rewards. So there's lots of data that indicates that firms that integrate charitable planning see higher growth and manage more assets per client. So this isn't just about doing good, it's also about doing good business. And this is really where your role, as a bridge builder, becomes all the more important. By guiding clients through a thoughtful philanthropic process, you do more than just manage their wealth, you are helping them to find the meaning in their wealth. And this process can build deeper, broader, more enduring relationships that can span generations.

And to help you on this journey, we've developed resources like our Guide to Effective Philanthropy and the Philanthropy Toolkit, which are both featured here. The toolkit, in particular, is a really practical step-by-step resource design to help you and your clients engage in thoughtful conversations about philanthropy. It helps anchor philanthropy in deeply held values and it also provides a very clear process for creating a smart, effective giving plan. And complementing the guide is the Philanthropy Toolkit, which is more of a hands-on activity-based workbook that's designed to facilitate thoughtful conversations about planning exercise that can translate some of that philanthropic intention into a much more concrete, actionable plan. And thank you, Ruth, for posting links to some of those resources.

This toolkit covers a lot of subjects, as you can see here, from finding a focus area to involving family. And crucially, the topic that we're going to be focusing on today is structuring your giving. So one of the first major decisions a donor faces, often after a really significant wealth event, is how to organize their giving. The structure they choose, the giving vehicle will have long-term implications for their flexibility, for their administrative burden, for tax strategy, for their philanthropic goals. So it's a really foundational choice. And our toolkit frames this decision making around a few key questions, which you can see here, which are designed for you to explore with your clients. And they include, how do I best organize my giving? How do I consider when to give, now, later? How should I give? How do I choose a vehicle that is right for me, not just now, in the moment, but in the long-term? And how can my structure adapt in response to new life events? These are really fundamental questions that can help guide the choice of a giving vehicle.

I think asking some of these questions can also help you uncover more information which may lead you to access new assets under management and donations for your nonprofit, so they're broadly relevant. And actually, I think what I'm going to do is I also want to point to a toolkit worksheet that we use towards the sun because it will be particularly helpful for all of you. So within the toolkit, we provide worksheets to help make this process, which might seem abstract right now, a lot more concrete. So this includes recounting past contributions to understand giving patterns and setting a forward-looking philanthropic budget.

So this can help ground the conversation in real numbers and intentions before selecting a vehicle. And what you see here is really two worksheets that are in the toolkit. One, which the client can review how they've given in the past and one for you to address the future budgeting questions together. It's important to note that most clients don't realize that they can afford to give at higher levels, which they really might, in fact, want to do. And so this budget question can be particularly important and these exercises can help them realize what is the appropriate budget for their philanthropy.

All right, so before I go into the details of giving vehicles and some of the research on these vehicles, I think I want to just give you a very brief summary of the four main vehicles that individuals might choose in the United States. So most everyday donors simply write a check or use their credit card to donate money to a nonprofit organization. This is easy use and there aren't usually extra fees. The other vehicle that we'll spend more time talking about today are DAFs, which is really one of the fastest growing form philanthropy in the United States. It's the donor-advised fund. They've been around for about 30 years, but the number of DAF accounts more recently have really grown quite significantly. I think just between 2014 and 2018, the number of DAF accounts more than tripled. There's more than 700,000 such DAF accounts now in the United States. In fact, DAFs receive over 12% of all charitable contributions from individuals.

And, as I said, or rather, DAFs are, in some ways, not altogether different from what you might think of as a charitable checking account. So donors put money into a DAF, they receive a tax deduction, and then the money sits there invested until the donor decides which charity should receive it. So donors with appreciated stock are most advantaged, in many ways, in setting up a DAF. This third vehicle are family foundations. These are a traditional structure for the wealthiest of individuals. These structures require a bit of paperwork and some administrative burdens, but they are great options for legacy planning and involving multiple generations.

And finally, the LLC, limited liability corporation, is the newest vehicle that many of the ultra wealthy in philanthropy are pursuing. These can be particularly challenging to set up, from a legal standpoint, and offer no tax deductions, but they allow individuals to donate to advocacy or political groups as well as traditional nonprofits. And we'll speak more to some of their additional levels of flexibilities. But it's worth noting that many of the super savvy donors out there are setting up LLCs alongside one or more DAFs or even a family foundation to achieve their philanthropic ends.

All right, and we can go ahead here. To establish some context, private foundations were one of the most popular and powerful vehicles for philanthropy in the United States, especially for ultra-high net worth families. But increasingly they are facing much more competition from newer and more flexible structures. In particular, as I mentioned a bit earlier, we're seeing really a rapid rise in the use of donor-advised funds, which are attracting huge volume of assets and contributors. And we're also seeing the emergence of other structures, like the LLCs, that are again pushing these boundaries of what philanthropic capital can do. And some of this change, the diversity of philanthropic vehicles, has to do with the sense that some of these older forms are maybe beholden to too old or traditional notions of what philanthropy should be and carry a certain baggage.

You can see an example of that here, with the Brooklyn Community Foundation, which decided to just ditch the foundation part of its name altogether. But many donors are also making use of these wide array of gifting vehicles because of the practical advantages they give them in pursuit of their goals. And in the next slide we can dive into a bit more of a detailed comparison. So this is the first part of a chart, which is also in the toolkit and in our guide. And it lays out the key characteristics of each of these philanthropic vehicles.

We won't go through every box here, but each clearly describes the differentiators that often drive client decisions. And in the next slide, we can zoom in a bit and you can see the chart a little bit more clearly. You can see in particular, some of these philanthropic considerations from whether the vehicle permits anonymity to the kind of control a donor might expect when using different vehicles. And if you take a look at this for just a bit, you can also see why, for some, the donor-advised fund might be a particularly popular choice, given it allows flexibility in terms of anonymity and public disclosure. And, like the LLC and checkbook giving, it doesn't have a requirement for annual distribution.

That is, unless the DAF sponsor mandates distribution, which makes the DAF, then, a particularly good choice for donors who might, for example, want to put aside some money for charitable giving, with the goal of distributing those funds later perhaps, because they have some significant demands on their time or they need time to develop a strategic plan for achieving their goals or they want to give once their contributed assets have appreciated in value. It's worth highlighting too, that only two of these giving vehicles offer the maximal control over grant making, that is checkbooks and LLCs. DAFs are a bit different there. Legally, the donor can only advise or recommend grants. The final legal authority rests with the sponsoring organization. In practice, however, a DAF sponsor almost always follows the donor's recommendations, but it is a legal distinction that your clients, when they're thinking about philanthropic vehicles, should understand.

There's another slide, which is the second part of this table, which lays out some additional considerations that clients will have beyond their specific goals regarding complexity, control, privacy, and timeline. And these include, as you can see here, whether and how family can be involved. And here you can see that the answer is always yes, but in different ways. In addition, one of the key considerations, arguably, especially more often, is whether the philanthropic vehicle permits the use of capital beyond grant making to non-profit organizations. So if you take a look at this, consider, for example, that you have a client who is fairly highly resourced and they want to engage in grant making to taxes and non-profits, but they also want to do some impact investing, make political contributions without restriction. Which of these vehicles would you recommend? Take just a moment and look through the slide.

So it's a client who wants to do contributions, taxes at non-profits, impact investing, as well as unrestricted political contributions. So hopefully you can start to see how this could be useful, but the answer would be yes. So I see it in the chat already. So the most obvious choice might be the LLC and then perhaps the checkbook giving choices. Thank you for obliging my question. On the next slide, it's, think as someone who's entering into the field of philanthropy or is advising clients, no doubt you've also encountered a lot of ongoing debates about philanthropy, especially in the last few years, which directly relate to a lot of these giving vehicles we've just described, and it's worth familiarizing yourself with these debates. In particular, many people are debating what kind of costs and benefits the current giving vehicles provide for society writ large, regardless of the particular benefits they may offer to donors. In particular, there's open conversations about whether we should expect greater levels of mandated disclosure from giving vehicles, should they be more transparent, whether payout minimums should be changed and enforced and so on.

And these debates often return to the Tax Reform Act of 1969, in large part because this was an act that has more or less structured how philanthropic organizations are regulated. And it was arguably the last, most significant and expansive effort to implement policy in a manner that could assure the public that philanthropy serves a social benefit. And to offer some brief context, prior to this act, most foundations in giving in general was not very transparent and a series of controversies inspired some skepticism that philanthropy was meeting its obligations to the public. This included concerns that foundations were using tax advantaged dollars to directly fund political campaigns and other instances of political advocacy, especially on civil rights, and concerns as well about foundations being used chiefly as a means to abate taxes or engage in profitable commercial dealings. And through the Tax Reform Act of 1969, Congress imposed essentially a few measures to assure Americans that philanthropic foundations serve a public benefit and they did so, in part, by distinguishing between private foundations and public charities.

Private foundations are so named because they usually derive their principal support from a single individual or family or corporation. And because of this limited funding base, Congress perceived them, rightly or wrongly, as having a greater potential for abuse. And so the 1969 Act really subjects private foundations to a specific set of operating rules and excise taxes as a result. Significantly, this includes minimum annual payout requirements, restrictions on lobbying, enhanced reporting requirements, restrictions on self-dealing, among other regulations. Public charities, in contrast, generally receive broad support from the public, government or other public entities, or they may perform specific functions, like churches, schools, and hospitals do. And on this basis, Congress deemed public charities inherently more accountable to the public and thus did not apply the same set of stringent restrictions imposed on private foundations.

And all this is getting us to where donor-advised funds come in. So a donor-advised fund is not a standalone entity. It is an account held within a sponsoring organization that is, itself, a public charity, like a community foundation or DAFgiving360. What that means is that when a donor contributes to a DAF, they are legally contributing to a public charity, qualifying them for that more favorable set of regulations, more favorable tax deductions that are associated with public charities. However, this is where some of those debates return, as they do not have those same reporting requirements or pay requirements as a private foundation. Some have expressed concern that they may be sidestepping some of the spirit of that Tax Reform Act of 1969.

And so this circumstance has provoked a lot of question about not only donor-advised funds, but giving vehicles and the philanthropies or the policies that should govern philanthropy more generally. Unfortunately there's not a lot of data that we have about these vehicles, but what we do know suggests that more nuance is required in conversation about donor-advised funds and some of these newer forms. Our faculty director, Paul Brest, if we can actually just go back to the previous slide, just for a moment, alongside Stanford Law Professor, Joseph Bankman, and a visiting University of Chicago Law professor, Daniel Hemel, led a policy research group on DAFs back in 2020 and enlisted as well a lot of researchers here at Stanford, including students.

You can find the recording transcript of some of their findings and they also published abridged version of what they found on the Stanford Social Innovation Review, which you see pictured here. And now we can go ahead to this next slide. And what that research found, and what other research has since substantiated, really challenges some of the assumptions that people have about DAFs and giving vehicles. For example, as I mentioned, while there are concerns that DAFs lead people to warehouse wealth, as there is no federal mandate that they will allocate their funds to charities, the actual giving rates of DAFs exceed that of private foundations. And you can see that visualized here by the National Philanthropic Trust. And likewise, it's not always true that delays in allocating philanthropic wealth are necessarily inherently negative. So for example, the researchers at Stanford concluded that the way in which some donors were using DAFs was to effectively place resources in the fund while learning how to practice philanthropy more effectively, including how to develop a more thoughtful strategy for achieving their goals, and give once that strategy had been smoothed out and developed.

In addition, they found that donors were staging their funding to have greater impact. So for example, a donor may want to fund the delivery of a vaccine after it has been developed or support the long-term rebuilding of a community after a natural disaster. And because the money in a DAF grows through the investment, meaning a dollar now becomes more than dollar later, you can, in fact, stage or funding for later purposes.

And finally, DAFs can act as a stabilizing force for the nonprofit sector, especially in times of crisis. The thinking here is that if donors have already committed wealth to DAF, they'll be more likely to grant it than they would be to make entirely new commitments during a downturn. And in fact, we did see this play out during the pandemic in 2020, when DAF holders actually increased their giving to meet some of the acute needs in the spring, during the pandemic, but also maintained their typical year-end giving patterns at the end of the year. So this supports this hypothesis that DAFs actually encourage counter-cyclical giving, providing more or less a steady stream of funds when operating charities need it most.

So I saw a question about whether DAFs are paying out more than foundations and whether that means all foundations are just family foundations. These figures don't indicate anything about relative foundation giving rates, but the minimum, which often becomes the maximum of a lot of private foundations, is that 5% annual distribution. And one conclusion we might draw from then is that DAFs are regularly exceeding that minimum. I can't tell you exactly the average pay out of family foundations, but maybe one of you has that knowledge at hand, but it's a great question. All right, so-

Micah McElroy:

I actually saw someone already talking or I think, Vera, you mentioned that there's some efforts to address some of these concerns and I think, in light of both the larger questions about philanthropy that we've raised and its relationship to society as well as your interest as an advisor in meeting your client's goals, we do recommend a few practices. So these are some of the good practices for DAF giving. One is to encourage people to move funds along, so contribute to your DAF today and designate to charities tomorrow, not years from now. This allows you to immediately benefit from the tax deduction if you just put the money into the DAF. But nonprofits don't benefit until you transfer that money out of your DAF to them, and they certainly need your support soon.

You can build written payout plans, for example, including annual floors, milestone-based triggers for allocating money out of the DAF. You can also use sponsor nudges or activity policies to keep moving funds when appropriate. Secondly, be transparent, be considerate, and, whenever possible, include your name and address, making a contribution to a charity from your DAF. Nonprofits really want to know who's supporting them. Communicate multi-year funding plans. It can be challenging to set up multi-year pledges through a DAF, so consider reaching out to let the nonprofits know you intend to contribute year over year. This helps them plan and saves them a lot of time and energy, wondering if they will be receiving your support in the future. Also, avoid credit card fees. So credit card donations become smaller once credit card fees are extracted. So consider using your DAF to avoid those transactional costs that burden the charities you want to support. Finally, take advantage of sponsor services. Many DAF sponsors offer a number of additional advisory services and benefits to DAF holders. Be informed about what else they can do to help you achieve your philanthropic goals.

Micah McElroy:

An LLC is particularly distinctive relative to some of these other giving vehicles for its operational versatility.

It's something we talked about a bit earlier, but essentially the main advantage boils down to their flexibility. So an LLC offers really a lot of versatility as a means for donors to achieve their goals. So an LLC can directly invest in for-profit companies that have a social mission. It can engage more freely and directly in policy advocacy and lobbying for specific legislation, which are activities that are highly restricted for traditional private foundations. LLCs can also directly own and operate businesses designed to achieve a social purpose, like creating jobs for specific community. So essentially LLCs really are a means for donors to combine grants, investments and advocacy under one roof. And I will, in this next slide, mention that there are some additional vehicles beyond the four that we've discussed. And Davide, I'll turn this to you.

Davide Estanislau:

I'm happy to elaborate on these vehicles, as they often come up in conversation with advisors. Charitable remainder trusts, CRTs, it's essentially really an legal arrangement where you irrevocably transfer assets, really often appreciated ones, to a trustee who then sells them tax-free, providing you and other beneficiaries with really an income stream for a set term or life. And after the term ends, the remaining assets are then distributed to the charity, the designated charity of choice there. The key benefits to really highlight here includes tax-exempt income, an income tax deduction, and the ability to convert the liquid assets into cash. So that's the CRT. We also have qualified charitable distributions that are a great account here, which are also QCDs for short. They really allow individuals that are at least 70 and a half or older to transfer funds from their traditional IRA directly to the charity, a qualified charity, without the distribution being treated as a taxable income.

So this strategy is great too because it can actually satisfy your RMD, your required minimum distribution. And it's beneficial because it provides an exclusion from income rather than a deduction. So allows the non-itemizers the ability to receive a tax benefit for their charitable giving. And then we have the charitable gift annuities, which also CGAs for short, is really a contract where assets like stocks or cash are transferred over to a charity, and in return the charity pays a fixed income for life. Now donors typically receive an immediate tax deduction for the gift and can really benefit from potential tax savings on the appreciated stock. So after death, the remaining funds go to the charity, the remainder charity of choice. So these are three options that, again, it's all about optionality and knowing what's out there and what works for your client.

Micah McElroy:

Excellent, thank you so much.

Davide Estanislau:

Of course.

Micah McElroy:

So we can shift to this next slide, which is really our last substantive slide I have for all of you. And what I want to note here, before posing some of these reflection questions for you to consider, is reflecting backwards and noting that what we've drawn out, I think, are some of the practical questions and considerations you may have about giving vehicles with your clients and how important it's to find the appropriate vehicle. But there's also these much larger questions that come out of debates about giving vehicles, which we also flagged, which certainly pertain to philanthropy more broadly. And these include how and whom philanthropy should be accountable, how transparent should philanthropy be, as well as some of these temporal questions about philanthropy. Does philanthropy have a greater responsibility to the present or to the future?

And certainly we won't answer these questions today, but I think it's worth noting, as we've started to work out here, that policy can reward or incentivize different answers to those questions. And that's what Congress tried to do in 1969, but arguably their measures, to some, have grown somewhat outdated. And as such, we're seeing more people in the nonprofit sector and scholars and even politicians really debating the merits of revising these laws related to philanthropy in the United States. In fact, some of you have already started asking about these questions.

Davide Estanislau:

Okay. Well I just want to add thank you all for joining us today. I hope this session gave you practical insights and really tools you can bring into your client conversations. As mentioned, we have several resources available to you, Stanford's advisor toolkit, as well as DAFgiving360's Giving Guide with the Advisor Guide. If you have any follow-up questions specifically with DAFgiving360 resources, feel free to reach out to your local charitable consultants. If you've never had a chance to interact with DAFgiving360, we have a robust and excellent business development team that can be a great resource for you. So again, thank you so much. And with that, I'll turn that over to Vera and Micah.

Ruth Selby:

I will just say we do have one question pending. Thanks so much, Dave. One question on the content from today's session says, seems like LLCs make the most sense for the ultra wealthy, as you mentioned, Micah. What asset level does that typically make sense? And does PACs have estate planning attorneys or staff that you recommend coordinating with? Vera or Micah, if you'd like to take that question.

Micah McElroy:

Yeah, I think you're right, that it is a mode that is more suited to very wealthy philanthropists, given that, in contributing to an LLC, there aren't the same tax advantages. I would hesitate to suggest at what level it makes sense to create an LLC rather than another philanthropic vehicle. I think more, the consideration should be what is the appetite of the philanthropists for a variety of different kinds of philanthropy. If they want to engage in, again, the impact investing, policy advocacy, they want to think about how they can create or invest in businesses with a social purpose and they want to coordinate all that activity in one place, I think the LLC makes a lot of practical sense to them. 

Vera Michalchik:

Davide, I believe this is for you. One question about the C types, CRTs, CGAs, et cetera. Which ones are the most popular now and why?

Davide Estanislau:

So all three of the C types that you allude to are all very popular and engaged in conversations that I come across with advisors, along with the donor-advised fund. I don't have those statistics to share what is most popular, but it really comes down to, when you're having conversations with your client, what is important to them, both from a philanthropic perspective but also from a tax perspective. Make sure you are aligning those goals together with the proper vehicles. So knowing what those vehicles are, what are those advantages and providing again, optionality, for your client to have these conversations. And as I mentioned, we have great resources to visit our website for additional questions. Arming you with that material to ask those questions, get that information and feel free to reach out to our team for additional information, as we're always happy to be a resource.

Vera Michalchik:

And I want to emphasize how grateful we are to DAFgiving360 and how much we have thoroughly enjoyed the partnership with the wonderful folks there. I recommend them, speaking of recommendations, and really thank you Dave and your team for all that you offer. Hey, there's a question from Jason. Is there some level of optimum payout percentage from DAFs or other vehicles? It seems like it could vary a lot from one client to another. I think that's maybe the $64,000 question, and a question that leads to a lot of discussion in the field as to how quickly money should move from wealth holders to their intended charitable recipients. Mike, I know that you've given decades of thought to this question, even though you're not decades old.

Micah McElroy:

I was thinking about DAFs day I was born. Again, I guess I hesitate to suggest that there should be some kind of standard or optimum number that we could shoot for across all DAFs. I do think that should be more of a conversation that is public. And I do feel that right now, with the circumstances things are, that whatever the giving rate should be, should be more closely tethered to the goals of the particular client. So again, if they're new to philanthropy or if they're still, I mean this is a common occurrence here in Silicon Valley. You can be an entrepreneur and you're working all the time and you don't have time to dedicate to philanthropy. I think it's maybe permissible to have a lower payout, if it allows you the time to develop a more thoughtful plan for philanthropic giving at a later point, given that my primary concern is whether beneficiaries are well met by philanthropic dollars.

But at the same time, I think it's a great question and there are certainly a lot of donor-advised sponsors that have policies or recommendations and nudges for their clients about what number they ought to meet. So you might consult with a sponsor about what they think is the appropriate answer, given your client's needs and goals. It's a bit of a dodge, but I think in some ways my answer is that the payout is related to what your client wants to achieve. But Vera, I don't know if you have different ideas about that, what should be the optimum payout rate for a donor-advised fund.

Vera Michalchik:

Yeah. And there's debate, but because it's such a convenient vehicle, because the tax benefits have accrued to the donor, there are plenty of people who say the money should move pretty quickly. Otherwise, again, it is really within the prerogative of the donor to decide when and how much to give. But it's an exciting and convenient way to give. And if a donor has a focus on an issue area and ideally has some support in determining where the money should go, they've got some idea of how to choose their recipient. Hopefully that expedites to a point where the money moves and society benefits, in exchange for the tax benefit in a philosophical way.

Ruth Selby:

All right, well thank you all so much for joining us. I am going to leave our contact information slide up. I know some folks had questions about how to use the toolkit most effectively, which we would be happy to discuss, and any additional questions you may have about today's content or how to use our tools or the DAFgiving360 tools, please reach out. We are really here, committed to improve philanthropic practice and move more money to organizations that need it. So that's really our goal today and we thank you for joining us and for thinking about these issues because they are, in fact, important. So thank you Micah for our content today. Thank you to all of you. Thank you, Dave, for joining us from DAFgiving360. We so appreciate it and we will see you October 30th for our final webinar in this series on impact investing. Thanks very much everyone. Have a good rest of your day.

Micah McElroy:

Take care.

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