Frequently Asked Questions (FAQs)

FAQs: Donor-Advised Funds (“DAFs”)

Q:  What is a DAF?
A:  DAFs are philanthropic and social impact investment tools that allow donors (individuals, families, corporations, etc.) to fund special accounts through DAF “sponsor” organizations. Donors receive immediate U.S. income tax deductions and maintain allocation privileges over the fund’s distribution.

Q: Is LOHAS a DAF sponsor?
A: Yes, LOHAS acts as a DAF sponsor but one with a specific interest in enabling and supporting donors to make investments with their DAF funds into for-profit social and environmental impact ventures (though traditional grants to nonprofits are also permitted).

Q: Can DAF funds be invested in for-profit impact investments?
A: Yes, most DAF sponsors invest their donors’ DAF funds in their own (or someone else’s) financial products (such as mutual funds that might be invested in fossil fuel companies); LOHAS simply believes that the spirit of DAF legislation is better realized by investing those funds in ventures that are actually delivering positive, sustainable social or environmental impact.

Q: Does LOHAS work with investment, wealth, and tax advisors to help support their clients’ interests in impact investing through DAFs?
A: Yes, LOHAS is not a registered investment advisor (“RIA”), wealth/asset manager, or tax advisor. We focus on enabling social and environmental impact investments from DAFs and allow advisors to offer this additional DAF impact investing service to their clients without concerns over relinquishing client oversight.

Q: How does LOHAS support investors with their DAFs?
A: LOHAS helps parties or their advisors set up DAFs or transfer existing DAFs. Ultimately, we help serve as our clients’ DAF impact fund managers to help them identify, evaluate, and allocate the capital in their DAFs to social or environmental impact ventures that align with their passions and investment goals. If desired, that includes doing the tracking and reporting on those investments after they’re made.

Q: How does LOHAS get paid for its DAF impact investing support services?
A: The management fees of LOHAS and its DAF administration partner are limited to a small annual fee tied to a DAF’s assets under management as well as a minor transactional fee each time funds are deployed from a DAF.

FAQs: Fiscal Sponsor Programs (FSPs)

Q:  What is an FSP?
A:  Instead of starting your own nonprofit (along with the time and administrative challenges that entails), you can work with an existing 501(c)(3) public charity to form an FSP, which has the tax-deductible benefits of the public charity as well as the power to donate and invest funds (in endeavors mission-aligned with the new FSP). This FSP can serve as an alternative fundraising option that impact ventures can provide to their prospective supporters, enabling the receipt of donor-advised funds, foundation grants, and direct donations, which can then be invested in the impact venture that shares a mission with the FSP.

Q: Can the FSP also issue grants or serve other charitable purposes beyond just investing in the impact fund?
A: Yes, depending on the established mission and capital disbursement plan for the FSP, it can execute on multiple strategies if they are in alignment with those pre-set guidelines.

Q: How is LOHAS compensated for an FSP and supporting services?
A: LOHAS charges below market rates. The management fees of LOHAS and its FSP administration partner are limited to a small annual fee tied to an FSP’s assets under management (e.g., for funds that are invested) or a minor transactional fee for funds that are disbursed from an FSP that have no expectation of return (e.g., a donation or expense reimbursement).

Q: Does LOHAS raise the funds for its clients’ FSPs?
A: LOHAS is not an investor or placement agent (i.e., we do not match donors and grantors with deals). While LOHAS supports its clients’ fundraising efforts and may opportunistically lead donors or grantors to a client’s FSP, the purpose of a LOHAS FSP is to give the impact venture another tool in their fundraising toolbox (providing an innovative option to the venture’s prospective supporters).

Q: Do donors in an FSP obtain immediate tax deductions, or must they wait until the funds are deployed?
A: Donors obtain immediate tax deductions no matter when (or if) the FSP actually disburses the donated funds.

Q: Can foundation grantors to an FSP receive a return on investment if their charitable contributions are invested in an impact venture?
A: Yes, foundations can structure their support to an FSP as a “recoverable grant” (which LOHAS will help structure) so that pro rata returns on their invested grant funds can be returned to the foundation.

Q: Is there a requirement that the FSP allocate a certain amount of funds on a particular timeline?
A: No, unlike with a private foundation, there is no requirement that the FSP allocate any amount of capital or within any set timeframe.

Q: Where do financial returns go from investments made by the FSP?
A: Unless they are coming from investments made via a recoverable grant (as noted above), returns on investment revert to the FSP (in the same manner they would return to any other investor) so that they may be deployed towards future mission-aligned investments.

Q: Are investments or donations made by a LOHAS FSP limited by type, location, charitable purpose, etc.?
A: No, a LOHAS FSP provides an open-investment and open-cause platform with the ability to operate globally, so impact investments and donations are not limited to specific geographical regions, investment types, asset classes, or causes. Each FSP sets its own guiding charitable mission at inception and can be crafted to the individual purpose.

Q: Can parties from outside of the United States make donations or grants to an FSP?
A: Yes, donations and grants can be received from, and deployed to, anywhere in the world; however, philanthropy and tax laws differ around the world, so, for example, a contributor to a U.S. charity (i.e., a LOHAS FSP) may not receive the same tax deduction benefits if they are in Germany as they would if they were a U.S. citizen. If needed to address the requirements of foreign donors or grantors, FSP bank accounts can be set up in their country of origin with an agreement to deploy funds only in that country.

Q: Is LOHAS a registered investment advisor (“RIA”) that can advise the FSP or impact venture on investment decisions?
A: No, but because LOHAS does not act as an RIA or wealth manager, our team can offer unbiased guidance and support.

FAQs: LOHAS and Its Partners

Q:  Who is LOHAS?
A:  LOHAS is a thought leader in the impact investing strategic advisory arena. Supporting investors and donors (including corporations, foundations, family offices, and individual investors and their advisors) as well as impact ventures (from funds to companies, projects, and entertainment productions), LOHAS works to champion alternative investment structures and strategies to accelerate and amplify the flow of capital to socially and environmentally impactful pursuits.

Q: Who is LOHAS’s designated DAF and FSP administration partner?
A: Legacy Global.

Q: Who is Legacy Global?
A: For over 20 years Legacy’s creative solutions have helped donors and investors experience less paperwork, fewer taxes, more joy, and greater impact with the causes they care about the most. Legacy has worked with numerous foundations, corporations, and individual and family donors and investors around the world to deliver best-in-class solutions for administration, compliance, structuring, and delivery of impact opportunities in the philanthropic space.

Q: How do LOHAS and Legacy work together?
A: Forming the ideal partnership, the LOHAS team provides “front office” services, directly supporting donors with their DAF setup as well as impact investing strategy and execution and helping impact ventures with their FSP setup as well as messaging and donor/investor engagement needs; while Legacy manages “back office” requirements and DAF and FSP management, including receipt and disbursement of all funds, issuance of tax documentation, state and federal compliance, accounting, and reporting.

Q: What agreements are required for a LOHAS DAF or FSP?
A: There are two sets of agreements: the first is with Legacy to set up the new DAF or FSP, and the second is with LOHAS for the support services associated with the DAF or FSP. Notably, while a donor executes the DAF agreement with LOHAS, when setting up an FSP, LOHAS contracts with the new FSP, though the LOHAS support services agreement is also provided to the party setting up the FSP for full transparency.

Q: How can my organization establish a partnership with LOHAS?
A: Please CONTACT US and share more details on how we might work together.