Sunday, August 05, 2018

Thumbs up for DAFs

Today's NY Times has a long but ultimately unconvincing article about Donor-Advised Funds (DAFs). The headline and tone of the article suggest something nefarious is going on. But unless you think that future charitable spending is less admirable than current charitable spending, nothing of the sort is the case.

True, the money managers make some money from these funds, but they do for every pool of money they manage. Is contributing to a college endowment suspect because some money manager will be paid to invest the money? Of course not. Moreover, these fees need not be excessive. At the Fidelity DAF, which I use, I put the assets in low-cost index funds.

True, there is lack of transparency. But charitable giving need not be public. There is no law against anonymous giving to charities. Nor should there be.

Most important, the donor of the funds cannot get the money back to finance his consumption or that of his heirs. The money has to eventually go to IRS-approved charities. Putting money into a DAF is essentially a commitment to give that part of your wealth, plus all future returns on it, to charity. As such, DAFs should be applauded.