Sean at Tactical Philanthropy in an article he wrote for The Financial Times:
Your two main choices for a philanthropic vehicle are a private foundation or a donor-advised fund.
I would put it this way, your key choice is whether to give now or later, for impact now or later.
- Give now/Impact now = direct gift to the charity of your choice
- Give now/Impact later = set up foundation, donor advised fund now, make grants from it later.
- Give at death/Impact forever = testamentary foundation, with grants in perpetuity
- Give at death/ Impact then = bequest to charity
Even my version simplifies things, but you can see how important it is to ask not only when you want to send the money in a philanthropic direction but when you want the money to arrive where it will have social impact. Moving money to foundations and donor advised funds is, technically, "philanthropic," and you get the tax benefits, but the money does not begin saving the planet or curing AIDs, or helping battered women, or whatever your cause might be until the dollars reach the nonprofit partners.
Start by thinking about what you want to preserve or change in the world. Then consider the timing and amount you can afford. What does the nonprofit partner need when? What can you afford when? The strategies and vehicles that are right for you and for your cause will come out of that analysis. Financial managers will generally default to funds, as in foundations and donor advised funds, that they manage. This is how we in the financial trades are trained and generally how we are compensated. That is why you may want to involve your nonprofit partners in the conversation.
For maximum social impact: Consider a current direct gift, as large as you can afford, even if your financial manager blanches at the thought.
Caveat: All fact and circumstances come into it. For example, if you have kids you want to learn philanthropy and direct grants after you are gone, that would argue for a donor advised fund or a foundation. But in the mix don't neglect to ask about social impact now or later. It is a key question, one that financial advisors too seldom ask.