Donor-Advised Funds A Risky Shot For The Wealthy Giving Game

• Donor-advised funds (DAFs) are increasingly popular among the wealthy for charitable giving, but a recent lawsuit highlights potential risks and loss of control.
• A Kansas resident is suing a Christian nonprofit, WaterStone, alleging they have refused communication and halted charitable grants from his family's $21 million DAF.
• Experts caution that donors using DAFs may misunderstand the level of control they retain over the funds, as the administering organizations legally control the assets.
• The lawsuit raises concerns about the balance between tax benefits and donor control in DAFs, potentially impacting the future of philanthropic giving.

Another Day, Another Assist Gone Wrong?

Alright folks, Michael Jordan here, weighing in on something that’s been making headlines – donor-advised funds, or DAFs. Now, I'm used to having complete control on the court, deciding when to pass, when to shoot, and who gets the assist. But this DAF situation? Sounds like some wealthy folks are finding out they don't have the same kind of control over their charitable giving. It's like trying to tell Scottie Pippen how to defend – good luck with that.

The Peterson Case A Costly Turnover?

This Philip Peterson case is a real eye-opener. Suing over a $21 million fund because he feels WaterStone isn't honoring his father's wishes? That’s like arguing with the ref in the Finals – you can complain all you want, but the call's been made. He thought he had the green light to direct funds as he pleased, but now he's finding out the hard way that DAFs aren’t exactly a slam dunk for donor control. It reminds me of when I thought I could retire and play baseball. Turns out, hitting a fastball is a bit different than driving to the basket. You can learn more about other interesting financial cases in the linked article: Nikkei Rockets to 58000 Is This Economic World Domination.

Tax Breaks vs. Total Command Is It Worth The Risk?

The catch here, as the experts point out, is that you get a tax deduction upfront, but you give up some serious control. Ray Madoff at Boston College Law School nails it – there’s a disconnect between what people think they're getting and the legal reality. It’s like thinking you’re getting a free pair of Air Jordans, only to find out they’re signed by someone else. Still cool, but not quite what you expected.

WaterStone's Defense A Defensive Foul?

WaterStone is saying they're honoring the original donor’s wishes, Peterson's late father. It’s a classic case of “he said, they said.” Like trying to figure out who really won the 1993 NBA Finals – me, obviously. But seriously, it highlights the importance of understanding the fine print. These organizations have their own set of rules, and you’re playing on their court.

The Broader Implications A Game Changer?

This case could set a precedent, potentially affecting billions in DAF assets. If the courts side with WaterStone, it means designated successors might not have the advisory privileges they thought they did. That’s a big deal. It’s like finding out your MVP vote doesn’t actually count. All that effort for nothing.

The Final Buzzer Don't Fumble The Ball

So, what’s the takeaway? If you’re thinking about setting up a DAF, do your homework. Understand the trade-offs, and don't assume you'll have complete control. Giving back is important, but you want to make sure your money is going where you intend it to go. As I always say, "Talent wins games, but teamwork and intelligence win championships." Make sure you have both when it comes to your charitable giving. And remember, sometimes, the best assist is a direct pass to the charity itself.