Philanthropy, Disrupted

It is the end of the year and some folks are looking to see if there is a tax-deductible charitable donation to make beside the ubiquitous bell-clanging Santa. But as I have documented in these pages before, it is important to give with your head as well as your heart.

Do your homework. Why? Because many even well-known charities have surprisingly high overheads and less than you might think of your hard-earned managed care money may trickle down to its intended beneficiary. Worse, because many charities do not have effective controls, they may not be able to document that your donation, even if made properly, will have actually done any good. That’s chilling and frustrating.

If you want to read a recent scree exposing some of the ugly underbelly of private philanthropy, try Linsey McGoey’s, No Such Thing as a Free Gift. But don’t get cynical just yet. There are quite a few vetted charities that have proven that they are effective.

Go on BolderGiving.org, Guidestar, or Charity Navigator to get a head’s up on where you can really have a positive impact with your tax deductible gift. Particularly watch to see if more than 25% of donations go to overhead; that’s a red flag.

You might consider Bolder’s “50/30/20” rule to help your annual philanthropic planning. Focus 50% of your giving on one charity you really care about, so your giving can have a real impact. Then 30% on local community gifts, like your church or library. Then put aside 10% for “impulse” donations, such as a friend calling about their pet fund raiser, or some catastrophe in the news that motivates you. Last year, the average American family donated $2,030, but some docs give much more (not including involuntary write-offs of bills and skimpy payments to subsidize America’s health bill, of course), so let’s make these voluntary awards count.

Recently in the news is a potential game-changer for future charitable giving. One that will alter the course of the giving river. Mark Zuckerberg, the founder and CEO of Facebook, announced that he was planning to donate 99% of his stock to charity, currently worth a whopping $45 billion, over the course of his lifetime.

Bully for him, you say. But how does that change the overall picture for the rest of us? I’m glad you asked. The big disrupter, as they say here in Silicon Valley, is that he is not putting the money into a traditional charitable 501c3 foundation or trust. Nope, he has established his potentially charitable vehicle as an LLC, a Limited Liability Corporation.

This enables him to retain more control and flexibility, in a nutshell. And to permit him to invest in potentially for-profit ventures that might help achieve his otherwise charitable goals. All while limiting his personal liability, as in the 501 3-C, but without the same rules, filings, 5% per year minimum donation or scrutiny that comes with a high-profile philanthropic foundation. The big catch is that he actually does not even have to use the money for a “charitable” purpose. Look for wider usage of this tactic in the future once billionaires, who love to command options and control, map out the territory, maybe for the rest of us.

As I have always said, “Rich or poor, it’s nice to have money.”

Image (cropped) by Jason McELweenie/Creative Commons License 2.0.