A Powerful New Tool Transforms How Billionaires Give Fortunes Away

Ray Dalio, founder of the world’s largest hedge fund, has one. The Koch family, sitting atop a $137 billion fortune, has at least two. Still another entity, with unknown backers, owns a big stake in one of Wall Street’s fastest-growing financial technology startups.

The vehicle, long deemed a dumping ground for nonprofits like low-income housing developers, Rotary International and even the AARP, drew controversy in the past decade as a “dark money” political giving tool. Now it’s attracting billionaires who realize it offers far more.

The most important quality of the so-called 501©(4) organization boils down to one word: control.

Control over their business. Control over political influence. Control over disclosure. Control over taxes. And, of course, control over the crucial soft power of charitable giving.

All in one place.

Gone are the days of steel baron Andrew Carnegie, who followed the tried-and-true path of minting a vast fortune, selling the business and then devoting time and energy to giving the money away. The key advantage of 501©(4)s (hereafter: C4s) — made clear earlier this year by Patagonia founder Yvon Chouinard — is the ability to tap the illiquid wealth of entrepreneurs and owners of private family businesses, without demanding that they step away.