A Guide to Vehicles for Philanthropy and Charitable Giving
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Paper 10 Tools for Good: A Guide to Vehicles for Philanthropy and Charitable Giving Paula Doherty Johnson, Stephen P. Johnson FULLFULL VERSION November 2004 ToolsTools for Good: A Guide to Vehicles for Philanthopy and Charitable Giving ABOUTABOUT THE PROJECT The foundation sector grows at a considerable pace and is about to entail significant changes in the three1way relationship of private wealth, public policy and non profit action. To cope with the challenges arising from these transformations the International Network on Strategic Philanthropy (INSP) was established in spring 2001. With the underlying assumption that strategic philanthropy is more effective philanthropy, the network has striven to professionalize foundation management, convene the excellent minds of the sector, clarify the guiding values behind foundation activities, and contribute to capacity building in the field. The 68 members of the INSP are representatives of foundations and support organizations, consultants and researchers from the US, Europe and other countries of the world that operate along the lines of strategic philanthropy. The network now presents a number of high1quality papers on a range of important subjects regarding strategic philanthropy. These include topics such as the role of philanthropy in globalization, new innovative instruments for philanthropy, promoting philanthropy, the role of evaluation in foundations and effective board management. The papers are available for free download at the INSP´s Web site at www.insp.efc.be. INSP is an initiative of the Bertelsmann Stiftung in collaboration with Atlantic Philanthropies, the Charles Stewart Mott Foundation, the Compagnia di San Paolo, the Ford Foundation, the German Marshall Fund of the United States, and the King Baudouin Foundation. Along with the Bertelsmann Stiftung, three institutions – The Philanthropic Initiative, Inc., The Hauser Center for Nonprofit Organizations at Harvard University, and The Center for Civil Society at the University of California Los Angeles – help to coordinate the work of approximately 70 network members. The INSP working groups are advised and coordinated by representatives of leading academic and consulting institutions: Prof. Helmut K. Anheier, Director, Center for Civil Society, University of California Joe C. K. Breiteneicher, President, The Philanthropic Initiative Prof. Christine W. Letts, Associate Director, Hauser Center for Nonprofit Organizations, Harvard University For more information, please contact: Dirk Eilinghoff Philanthropy and Foundations Bertelsmann Foundation Carl1Bertelsmann1Strasse 256 33311 Gütersloh (0049) – (0) 5241–81 81391 [email protected] ABOUTABOUT THE BERTELSMANN FOUNDATION The Bertelsmann Foundation is Germany´s largest foundation established by a private donor. In keeping with the longstanding social commitment of its founder, Reinhard Mohn, the Bertelsmann Stiftung is dedicated to serving the common good by encouraging social change and contributing to society’s long1 term viability. To achieve this, it maintains an ongoing dialog with all of society’s stakeholders. The belief that competition and civic involvement form an essential basis for social progress is central to the foundation’s work. In order to apply its expertise as effectively as possible, the Bertelsmann Stiftung is structured according to subject areas. The foundation's 280 employees focus on Education, Health, Economics and Social Affairs, International Relations, Corporate Culture and Promoting Philanthropy. Page 2 ToolsTools for Good: A Guide to Vehicles for Philanthopy and Charitable Giving CONTENTSCONTENTS INTRODUCTION ................................................................................Fehler!Fehler!Fehler! Textmarke nicht definiert. THE PHILANTHROPIC LANDSCAPE.......................................................................................................5 THE PROCESS OF GIVING ....................................................................................................................8 CHOOSING A GIVING MECHANISM...................................................................................................10 PLANNED GIVING..............................................................................................................................14 PRIVATE AND FAMILY FOUNDATIONS ..............................................................................................15 COMMUNITY FOUNDATIONS ............................................................................................................20 DONOR ADVISED FUNDS ...................................................................................................................25 GIVING CIRCLES ................................................................................................................................28 VENTURE PHILANTHROPY .................................................................................................................32 REGRANTING/ISSUE FUNDS...............................................................................................................35 E1PHILANTHROPY ..............................................................................................................................37 CONCLUSION.....................................................................................................................................40 RESOURCES .......................................................................................................................................41 ABOUT THE AUTHORS .......................................................................................................................49 INSP TITLES........................................................................................................................................50 Page 3 ToolsTools for Good: A Guide to Vehicles for Philanthopy and Charitable Giving INTRODUCTIONINTRODUCTION The International Network for Strategic Planning (INSP) provides a forum for dialogue and critical thinking on the role of philanthropy and its impact on societies around the world. Operating as a decentralized think tank, INSP gathers, builds, and disseminates knowledge about effective philanthropy and develops new tools and resources to professionalize and improve its practice around the world. Ultimately, INSP hopes to promote greater giving, more strategically engaged. The Bertelsmann Foundation is the principal sponsor of INSP, with additional support provided by the Charles Stewart Mott Foundation, Atlantic Philanthropies, the Compagnia di San Poulo, the Ford Foundation, the German Marshall Fund of the United States, and the King Baudouin Foundation. Along with the Bertelsmann Foundation, three institutions – The Philanthropic Initiative, Inc. The Hauser Center for Nonprofit Organizations, and The Center for Civil Society at University of California Los Angeles – help to coordinate the work of approximately 70 network members, who come together in small working groups to explore various issues. One output of the INSP network is the development and publication of a series of monographs on key issues in global philanthropy. Separately, the monographs provide introspection and analysis into critical aspects of the foundation sector. Together, they provide a valuable roadmap to improved global philanthropy. The purpose of this paper is to explore and illuminate the range of vehicles through which charitable giving and philanthropy are practiced today on the global stage. Over the past several decades, philanthropy has witnessed the emergence of a number of giving vehicles, some with roots in conventional models of philanthropy, others that introduce entirely new elements into charitable giving. The direct gift, while still king in most countries, is increasingly complemented by a rich range of other vehicles for giving, e.g., donor advised funds, private foundations, and giving circles. All are a response to donors’ desire to find the method that fits their goals and personal style, and to maximize philanthropic impact. Throughout this paper, the authors’ intent is neither to endorse nor indict any particular vehicle for charitable giving. Rather, the intent is to provide a fair and unbiased view of those vehicles that exist today, with the objective of promoting public understanding and their potential adaptation in countries and regions in which they are less well known. The paper is structured in a straightforward format, treating each giving vehicle as briefly as possible with examples provided to illustrate practical applications. Included in the discussion of each mechanism is an overview of its fundamental characteristics, its regional uses and variations, constraints and other considerations affecting broader global applications and additional information resources. Page 4 ToolsTools for Good: A Guide to Vehicles for Philanthopy and Charitable Giving TTHEHEHE PHILANTHROPIC LANDSCAPE Before embarking on a discussion of various giving vehicles and their potential global applications, it is important to note briefly the context in which global philanthropy is evolving today. The strong economies that many Western nations have enjoyed over the last decade or so, combined with the early stages of the intergenerational transfer of wealth, have created unprecedented growth in personal fortunes in the West. Shifts in the boundaries and balance between the state, the market, and civil society have led to significant increases in the size,