Philanthropists Should Encourage Greater Giving – Not Force the Issue
Donor-advised funds have done a lot of people a lot of good, but some argue that the way they work needs to change. But why fix what isn’t broken?


What’s the most effective way to increase charitable giving? Billionaire energy trader John Arnold and his wife, Laura, recently offered one solution. They created the “Give While You Live” campaign, encouraging billionaires to donate a minimum of 5% of their wealth to charity every year.
The Arnolds are putting their money where their mouth is, which is commendable. And they’re not the only ones. Overall charitable giving in 2020 increased more than 10% over the previous year for donors of all income brackets.
For decades, household charitable giving has been stuck around 2% of a family’s adjusted gross income. To make gains, we need people like the Arnolds encouraging a sizable leap toward greater giving. They lead by example and, in so doing, inspire others to act in-kind.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
A Push for New Rules on How Charity Works
Yet John Arnold isn’t wedded to the “carrot” approach. He’s OK with sticks, too. He and Boston College law professor Ray Madoff are lobbying Congress and the Biden administration to force philanthropists using donor-advised funds (DAFs) to move up the timeline on grant payouts made from these charitable accounts.
Encouraging more philanthropy is critically important but involving the heavy hand of government to mandate payout timelines on DAFs is misguided, in my opinion. Independent philanthropic freedom is critical in a free society and should be preserved.
Arnold and Madoff, moreover, are trying to force sweeping changes to a financial vehicle that safeguards and optimizes a person’s charitable dollars. Why fix what isn’t broken? Instead, we should be celebrating all those who recommend such grants after thoughtful consideration of their own interests, timeline and charitable giving goals.
The past year of giving indicates that donors can and will engage to address problems, especially when massive problems – such as those created by a pandemic and economic crisis – make needs so evident.
DAFs serve as a charitable saving account for donors. There is value in having a rainy-day fund to draw from when times get tough. This past year, we’ve seen that promise play out (as we did, by the way, during the economic downturn of 2008 and 2009).
DAF payout rates are climbing. At more than 20% annually in recent years, DAF payout rates consistently dwarf payout rates of similar charitable vehicles and nearly doubled between 2019 and 2020 as COVID-19 wreaked havoc across the United States.
A Bad Rap for Donor Advised Funds
As Howard Husock, adjunct scholar at the American Enterprise Institute, writes, DAFs award “far more than the 5% which mega-foundations like Gates and Ford are required to disburse” and, as a result, should not be singled out for heavy-handed regulation.
Yet DAFs in particular have been wrongly criticized for years. This is often due to confusion over payout rates, anonymity and growing account balances, which some believe stems from donors taking an immediate tax deduction and then refraining from awarding grants right away.
People forget about the time value of money. As Husock discusses in a recent paper, funds in DAF accounts grow over time, enabling additional generosity. This optimizes a donor’s gift to his or her charity of choice on a timeline that works for the donor’s unique circumstances.
These charitable investment funds, effectively, are an essential financial stewardship tool. Put another way, the purpose of a DAF is to be actively charitable. “Warehousing” money in a DAF is a misnomer, as a DAF is inherently dynamic. Money doesn’t simply “sit” in a DAF — it generally grows in a DAF, and those funds can only be used for an operating charity.
Those with DAFs award grants at higher rates than those overseeing similar funds, and step up to the plate even more during times of crisis, as evidenced by giving trends throughout 2020. The payout rate at DonorsTrust in 2020, for example, was closer to 60%.
Allies of the Arnolds have created additional campaigns, proposed mandates and other initiatives to increase and encourage giving, as well as significantly alter the rules around DAFs. These plans, however, offer a solution in search of a problem.
New Mandates Sought
Despite the proof from 2020 that Americans are happy to give voluntarily, the conversation centered on increasing overall giving continues to include calls for new mandates. Another way to look at it, some groups simply want “more money” from citizen givers.
The Initiative to Accelerate Charitable Giving, the formal name for the Arnold/Madoff proposal, for example, has made efforts to weaken philanthropic freedom through new mandates on private foundations and DAFs to spend their money faster or face punitive measures. For a more detailed discussion about these mendates, visit the Philanthropy Roundtable blog to hear from other subject matter experts.
Mandatory volunteerism is a bit of an oxymoron. Instead, let’s celebrate the diversity of giving inherent in Americans instead of forcing a one-size-fits-all framework on donors.
Inspiring charitable giving through actions is a commendable sort of leadership. Rather than overreach and discourage philanthropy, we should encourage both the wealthy and those of lesser means to give more money the right way.
Especially now, as we emerge into a post-pandemic world, the economic damage of the past 18 months continues to wreak havoc on families in a deeply personal way. We should be praising those who continue to give charitably – regardless of how they do it – rather than succumbing to mandates by those who think they know best how to spend other people’s charitable dollars.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Lawson Bader has served as president and CEO of DonorsTrust since 2015. He has had 20 years' experience leading free-market research and advocacy groups, including the Competitive Enterprise Institute and the Mercatus Center. DonorsTrust is a community foundation safeguarding the intent of accountholders who seek to promote charities that address civic concerns, are mostly privately funded, do not increase the size and scope of government, and promote free enterprise and personal responsibility.
-
The Most Popular Apps for Retirement Planning in 2025
A J.D. Power survey ranks retirement planning apps based on customer service and satisfaction. Does your financial app make the cut?
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms
Standard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms
Standard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams Now
Beyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on Retirement
While some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
One Small Step for Your Money, One Giant Leap for Retirement
Saving enough for retirement can sound as daunting as walking on the moon. But what would your future look like if you took one small step toward it this year?
-
This Is What You Really Need to Know About Medicare, From a Financial Expert
Health care costs are a significant retirement expense, and Medicare offers essential but complex coverage that requires careful planning. Here's how to navigate Medicare's various parts, enrollment periods and income-based costs.
-
I'm a Financial Planner: Could Partial Retirement Be the Right Move for You?
Many Americans close to retirement are questioning whether they should take the full leap into retirement or continue to work part-time.
-
From Mortgages to Taxes to Estates: How to Prepare for Falling Interest Rates
As speculation grows that the Federal Reserve will soon start lowering interest rates, now is a good time to review your financial plans for housing, estate, taxes, investing and retirement to make the most of potential changes.
-
This Is How Lottery Winners Build Lasting Legacies, From a Financial Professional
Winning a massive lottery jackpot, like the recent $1.4 billion Powerball, requires seeking immediate legal and financial counsel, protecting your identity and winnings and planning your legacy.