Last month’s article (How anyone can donate $ Billions to charity) demonstrates how you or any donor could repeatedly give billions of dollars to charity. Ok, this addresses the mechanics of raising such funds, but how exactly does a donor give away money to an unknown future?
This article will address the who, what, where, when, and why questions concerning these large future gifts and identify some guiding principles.
Recall that the plan to create huge funds starts with small gifts that grow via investment, and at each subsequent twenty-five-year period, half the account's future value is donated. Over enough time, even the smallest starting gift can spark enormous gifts.
If every individual could one day give billions, making a huge difference in future, then how donors direct their giving becomes of paramount performance. Yet the job is especially daunting because it's for decades and centuries from now.
An example that partially went wrong
Benjamin Franklin had asked (via a codicil, a late addition to his last will) that city managers run a lending business to help young artisans start their start-up enterprises. This was to last for two hundred years after he died in 1790, with funds accumulating from interest paid and repeated loans.
The city managers agreed to honour this request and ran the business for 200 years. In the end, in 1990, Franklin's request was to give away the balance of funds accumulated to the cities of Boston, Philadelphia, and the State of Pennsylvania.
Franklin inadvertently caused issues with his post-life contributions by leaving much decision-making to future society members. While this must have seemed fair to Franklin, the result was probably not quite as he may have wished in important ways.
Thankfully, this was how he specified when and where to spend the money. The payout problem that arose was Franklin did not describe his intentions for who, what or why to spend it. Everyone, therefore, thought they had a right to spend it as they saw fit. This lack of specificity resulted in a long legal battle that began in 1990 and required an act of congress to resolve.[i]
As we follow Franklin's footsteps and plan to give more and more money every 25 years, we must ensure not to cause similar problems!
The solution
The goal is to stay flexible and relevant over the future centuries while honouring the donor's wishes. Here is a proposed solution summary with detailed commentary to follow:
When: Every 25 years.
What (How much): Funds Generator (discussed here) pays out half the accumulated funds and re-invests the other half.
Who: Funds Generator administration pays out the money to a Community Foundation's Donor Advised Fund (DAF) held in the donor's name.
Where (which charities): The Community Foundation decides the details of which charities will benefit, per guidance from the donor's intentions.
Why: Donor intentions are written into the DAF or expressed by the donor to the Funds Generator with their seed contribution.
Commentary - When and What (How Much)
The time period of 25 years is aligned with society's typical anniversary celebrations. Every seed fund contribution grows for 25 years; at every anniversary, half is given to charity, and half is re-invested.
Reducing the wait per payout is desirable when the fund's size becomes significant. Say the funds generator total for a donor reaches $1 Billion to give and reinvest. Instead of continuously waiting 25 years for a payout on a $1 Billion reinvested, an annual payout is possible based on a seed fund investment of $20 Million each year ($1 B/25 years).
The result is that after the next 25 years, annual payouts and re-investments of half the annual funds begin. (We will address transition possibilities in more detail in a future blog).
Commentary - Who decides where (which charities) to spend your future gift
Mackenzie Scott[ii] is an interesting recent example of how billionaires could give away money. In 2020 as COVID affected so many Americans, Scott donated nearly $4.2 billion to 384 organizations. Her list of charities includes big names like Goodwill, Meals on Wheels, and the NAACP, but also smaller organizations that target issues specific to local communities.
You might wonder how Ms. Scott quickly selected these particular and many organizations. First, she had the help of a team. She gave the team instructions about her intent: to take “a data-driven approach to identifying organizations with strong leadership teams and results, with special attention to those operating in communities facing high projected food insecurity, high measures of racial inequity, high local poverty rates, and low access to philanthropic capital.’[iii]
Secondly, Scott made unrestricted gifts. Once her team identified the recipient charities, they trusted them to deliver their services in the most effective way possible.
Mackenzie Scott's team approach would have resolved Ben Franklin’s issues, but how can you organize a team for every twenty-five-year period in the future?
Your team can be a community foundation.
Community foundations have administrators that run local charitable programs or give funds to other charities. Local community foundations identify and provide support for the most crucial local needs of the day. The Community Foundations of Canada lists 191 communities with foundations to support and build thriving communities.[iv]
Major city community foundations also host 'Donor Advised Funds', including the Vancouver Foundation and the Toronto Foundation. You arrange a DAF because this becomes a convenient host for holding your intentions with administrators that subsequently act to address your charitable wishes. (Alternatively, knowing your intentions, the Funds Generator can set up your DAF with the first payout.)
You can help the DAF administrators divvy up your gift by declaring your intent regarding an area of focus for your funds. This approach is not to restrict the use of funds tightly, rather, it allows charities serving certain focus areas to be considered as potential recipients.
For example, the Vancouver Foundation currently supports ten local focus areas: Community Impact, Addressing Homelessness, Animal Welfare, Arts and Culture, Children and Families, Education, Environment, Health, Social Services and Youth[v]. Various recipient charities may come and go over time within these focus areas, as decided by the foundation's administrators.
By transferring money from the Funds Generator to your personal DAF every 25 years, that community foundation's future staff will disperse your funds as you instruct (or as close as they can) in a manner aligned to the situation faced in future times.
The why of your giving: declaring your intent
We can significantly help these future community foundations' DAF administrators by clearly explaining our intentions. Future administrators will decide on specific uses for the new funds received at each payout. Future administrators will keep our wishes in mind to the extent they are relevant and possible.
The why of giving, the donor's intent, is the most important guidance we can give DAF administrators to ensure our $Billions are used in a way aligned with our hopes and dreams.
Next month's article will explore how donors could define their personal intentions for using their gifts in the deep future that lies before us all.