Planned Giving Articles – Et tu, New York Times?

I better start reading the New York Times because I am almost missed this one by about two months.

The link is below but here is my introduction:

It’s about the National Heritage Foundation (NHF) bankruptcy situation. The article starts out bemoaning the fact that NHF had to take $25 million of its Donor Advised Fund (DAF) money to settle with its 107 gift annuitants. Then the article moves into a loose discussion about gift annuities. Check it out if it interests you but please see my after-article comments below

I was asked by a friend today about a line in this article that made a board member nervous.

I am going to try and keep my comments ask kind as possible. The article’s beginning leaves out one crucial legal fact: DAF money is considered from a legal point of view to be TOTALLY and COMPLETELY UNRESTRICTED. That’s the deal – sorry DAF donors. If the charity runs into financial trouble (like NHF did), DAF money is TOTALLY AND COMPLETELY AVAILABLE. Period. If the DAF donor doesn’t like it, then start a private foundation.

That is why the legal cases of most of NHF’s DAF donors were thrown out of court. It doesn’t excuse any fraud committed by NHF in obtaining those donations.

Secondly, my problem with this article is that it seems to be pitting DAFs as the good guy and CGAs (gift annuities) as the bad guy. Or maybe not. I actually know the author, and I think she is a great writer, but something tells me that the editors messed this one up. I really couldn’t respond to the question I received this morning because I had no idea where the article was going.

Third point – this is a quote from the article:

Faced with shrunken endowments, charities are seeking to bolster giving by heavily marketing gift annuities, emphasizing the income stream they offer.

The article offers no proof of this statement and if you asked me, I would say the opposite. I think charities have slowed their CGA marketing out of fear of the liabilities they are dealing with. Getting new annuities is actually a good idea for a basically healthy program but it has nothing to do with NHF or the initial part of the story.

There was an interesting story there – it just never came out. It is interesting to note that DAF money was used to pay off CGA donors of a charity going into bankruptcy. What was also interesting was the fact the CGA donor mentioned actually received back $131,239 from his initial CGA gifts of $235,000.

Considering what Madoff investors, as well as other ponzi scheme investors, will receive, I think the NHF CGA donors did pretty well. I am guessing that this donor got to keep his initial charitable deductions. He was barely out of pocket if you think about it. The story should have been how CGA donors had a right to receive something in the bankruptcy – and obviously were in a decent place in the line.

Something about the whole article bothers me – is it only me? Isn’t there lack of focus? No wonder a board member is pulling a quote from the piece to cause some trouble. It took me a few minutes to figure out what it was talking about.


  1. Hi Jonathan. I saw the article and when I read it I was gratified to see that the CGA donors got the money that was coming to them. No CGA contributor is entitled to a refund of their gift; their annuity payments are guaranteed and (I believe without having to re-read the article) they got them, even from “unsavory characters” like the NHF.

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