Prabal Gurung, Ben Roethlisberger and the Fashionable Sport of Charitable Giving
At a recent speaking event at The Battery Club in San Francisco, fashion designer Prabal Gurung spoke about the impact of technology and fashion. As the conversation shifted, Gurung mentioned recent headlines about his charitable foundation. He shared that his charitable drive developed when he was an up and coming designer in New York City and was once told, “It’s only fashion.” Those casually tossed off words motivated him to build something that generates good in the world.
And that motivation has paid off. Since establishing The Shikshya Foundation Nepal with his sister and friends in 2011, he has helped create educational opportunities for Nepalese youth as well as provide significant support to Nepal in recovering from the 2015 earthquake. In fact, he generated so much awareness of the Nepalese earthquake that many in fashion, including the CFDA, contributed to the foundation. Clearly it isn’t “only fashion.”
But that charitable drive is seen in other sectors as well, and it always comes down to what is personal. Ben Roethlisberger of the Pittsburgh Steelers is another example of the intersection of philanthropy and personal values. Roethlisberger’s charitable goals are close to his heart – providing support to K-9 units and service dogs. On his website, Roethlisberger communicates his appreciation for the unique opportunity he has been given in life. He wants his charitable goals to reflect the love of animals he learned from his dad and his support of police and fire departments across the United States.
Both Gurung and Roethlisberger take causes near and dear to their hearts and provide action and support. But they take two different approaches to implementation.
Despite his cutting-edge fashion, Gurung takes a very traditional path for people who achieve wealth. His charitable vehicle is a foundation, which has a complicated tax structure. First, it must be approved as a 501(C)3 by the IRS. Then, the foundation is required to file tax returns, have intense administration and adhere to the requirement that 5 percent of the corpus be donated annually. This structure is more cumbersome than most people need.
In comparison, Roethlisberger’s charitable fund is more reflective of the current trends in charity. He uses a Donor Advised Fund (DAF), which is a much simpler approach. While still a philanthropic vehicle, it is established under the umbrella of a 501(c) organization, thus eliminating many of the intense requirements of a foundation. DAFs date back to the 1970s but they’ve really taken off in the last 20 years.
In fact, for most individuals, the DAF is the best way to have a charitable fund.
Here’s how it works:
You open an account with a 501(c)3 umbrella organization such as Vanguard, Schwab, Fidelity, a bank or community foundation. DAF offerings seem to be ubiquitous these days.
You can name the account for your family, your focus, or a concept meaningful to you – and voilà, you have your own charitable fund.
DAF accounts require an initial transfer of at least $5,000 (terms vary by account and institution). As the donor, you can simply write a check to your fund and take the charitable donation.
But if you’re savvy, an effective tax move is to transfer appreciated stock that you have held for more than a year. That way, you don’t recognize the capital gain AND you still get the charitable deduction.
There are no filing requirements or administration – the umbrella organization handles everything for you (though there is a fee for this.)
There is no obligation to give the money away annually. In fact, you can let your DAF grow for years before you ever make a grant to a charity. Just remember, when you request a grant from your DAF, it must go to a 501(c)3, AND you do not get a charitable deduction as you took that up front.
While charitable planning may not be a fit for you today, you can certainly put it on your wealth aspiration list. Both Prabal Gurung’s and Ben Roethlisberger’s charitable endeavors took years to develop and even today are still evolving. As inspirational as both are, given the ease and simplicity of DAFs, most people would be well-served by following Roethlisberger as an example of how best to approach charitable planning.