Here is an Op Ed in New York Times that I just noticed in November 2011 entitled “Tax Write-Off Now, Charity Later” which discusses donor advised funds in the US and how they may disproportionately high net worth individuals and financial institutions and provide little benefit to charities.  The piece suggests some improvements to the rules around donor advised funds to increase their public benefit.

Tax Write-Off Now, Charity Later

“More and more charitable dollars are now being directed to what are called “donor-advised funds.” Many of these funds are affiliated with large financial institutions like Fidelity, Schwab and Goldman Sachs, and hold, invest and eventually distribute dollars for charitable purposes. In the meantime, they generate significant management and investment fees for the institutions that house them, which have little incentive to speed up the distribution of resources to the charitable sector. Most important, there is no payout obligation; while donors receive the tax deduction as soon as they make their contribution, their money can languish in these charitable holding pens for decades or even centuries (these funds are frequently marketed for their ability to allow donors to create a legacy for future generations).

Proponents of the funds point to their growth as a sign that they are adding resources to the charitable sector. However, data from the last 40 years show that charitable giving has remained remarkably constant, at around 2 percent of disposable income regardless of the economic climate. It appears more likely that the fund contributions are simply replacing what might otherwise have been outright contributions to charity. But instead of providing immediate relief to the needy and fuel to the economy by paying for goods and services, much of this money does nothing at all for an indefinite period. This is particularly troubling at a time when government cutbacks are going to make more people dependent on the charitable sector.

… Congress should enact rules that require donor-advised funds to distribute all of their assets to real public charities within seven years of their contribution. In addition, Congress should make clear that private foundations cannot meet their payout obligations by making gifts to donor-advised funds. Then we can have a real conversation about the best way to feed all those hungry people.

Ray D. Madoff, a professor at Boston College Law School, is the author of “Immortality and the Law: The Rising Power of the American Dead.”