Charitable Lead Trust Paying into Donor Advised Fund

Good explanation of how a Charitable Lead Trust can pay into a Donor Advised Fund. Note, however, how the plan delays the front line charities from getting the money. Say the CLT is set up to be funded at death, in, say, 20 years. Then it pays out a stream of income to the Donor Advised Fund over another 20 years.  The Donor Advised Fund in turn pays out, say, 5% of the accumulated funds each year for many years, in a little trickle to the front line organizations. The human race will be extinct by then, but at least the money managers will do well until the Trump of Doom.  A better piece of advice is to start by considering what you want to change or preserve in the world. Then figure out what timing of funds to the front line orgs will produce the real world social change you want.  My guess is that more money sooner will have a bigger real world effect. As Tracy Gary says, "early money is like yeast."

Taking advice from financial people or legal people about philanthropy all too often produces this kind of dysfunctional advice, to push money through any number of charitable tools, generating fees and commissions in the process. Advisors generally have no interest and little expertise in leveraging social change any time soon. To get real in your giving, I would suggest starting with the ends in view and communicating your vision in writing to your advisors.

If your goal is to change the world ASAP, before the problems get out of hand, give now, and give direct. If a CLT makes sense, consider just paying the stream of income direct to the front line charity of your choice.

Comments

[Randy Fox]

Phil,
While I agree with some of your thinking, You're a little harsh on the financial advisor and legal community. For some, the structure you discuss is a way of teaching/mentoring children and grandchildren about family philanthropy and values. how can that be bad?
What's really needed is a balance between current and future giving. Of course, that takes planning. And planning takes those evil attorneys and financial adviosrs again.

[phil]

Thanks, Randy, those are good reasons you give for the structure. Note, though, that the considerations, including the teaching of philanthropy to kids and grandkids, are all centered on the family. At what point does the family ask about the needs of the community? For a case study to be complete, it would have, I think, to include something about the good the family intends to do in the world, and how the pattern of funding supports that. If their thinking only extends to self and family, and their values and their education, etc., then I do think we have not done all we could. Thanks for the comment, though, you fleshed out the part I left out.