Donor-Advised Funds Get Policed

Speaking of charitable giving, as Jim Gust does below, The Wealth Report blog notes that donor-advised funds, the hot alternative to family foundations for many donors, face new scrutiny because of last year's Congressional legislation:

Donor-advised funds, which are popular with the wealthy, allow a person to make a donation to a fund, get an immediate tax deduction and later “advise” the fund about which charities should receive the money. The funds typically require minimum initial gifts of between $10,000 and $25,000 and charge fees of roughly 1% for administering and investing the money.

Donor-advised funds have exploded in size. Donor-advised funds held $13 billion in assets in 2005, up from $2.4 billion in 1995, according to the Chronicle of Philanthropy.

But all that growth has also brought abuses. Donor-advised funds were implicated in the Jack Abramoff lobbying scandal, and an IRS examination found this summer that the funds produced “strong evidence of abusive schemes.” The Pension Protection Act, passed by Congress last year, imposes fines or penalties for donors who use the funds to benefit themselves.

WSJ.com subscribers can read last Saturday's article on the subject here.