Donor Sued Fund Manager Over Advisory Rights
The legal battle highlights risks for operators holding assets in donor-advised funds as sponsors assert control.
Updated on Sept. 28, 2026 in Philanthropy
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Philip Peterson filed a lawsuit against WaterStone to regain access to the Peterson Family Stewardship Fund, which held over $21 million at the end of 2023. The dispute centers on the authority of successor advisers after WaterStone revoked access in 2024.
Why it matters
The case forces operators to confront the limits of their control over charitable assets managed by external sponsors. Because sponsors hold final legal authority, donors may face significant hurdles if they disagree with an organization's management of principal or investment income.
The fund reported a balance of more than $21 million at the close of 2023, while WaterStone issued $400,000 in distributions during February 2025. These figures track against the backdrop of a stalled $1 million grant proposal for Operation Mobilization.
The players
Philip Peterson
The successor adviser to the Peterson Family Stewardship Fund who is challenging the management policies of his fund sponsor.
WaterStone
A financial sponsor that manages donor-advised funds and retains legal control over the underlying charitable assets.
The details
Under the sponsorship agreement, WaterStone maintains legal control over fund assets, while Philip Peterson acted as an adviser recommending grants for processing. WaterStone disputes the authority of successor advisers to direct these funds, leading to a freeze on grant recommendations after the organization ceased communication with Peterson in 2024. The court is now tasked with determining if advisory rights stipulated by donors are legally enforceable against the sponsor's custodial authority.
Timeline
Gordon Peterson established the fund in 2005.
Philip Peterson became the sole successor adviser in 2021.
WaterStone ended communication with Peterson on March 5, 2024.
Account access was revoked by WaterStone throughout 2024.
Distributions of $400,000 occurred in February 2025.
Market Landscape
This litigation tests the boundaries of the IRS regulations regarding donor-advised fund sponsorship agreements which grant sponsors legal ownership of assets. The case marks a significant departure from standard advisory arrangements where sponsors historically deferred to donor recommendations.
Operators with donor-advised funds should review their sponsorship agreements to clarify the extent of their legal authority over grant recommendations and investment directions. Consult with legal counsel to understand if your donor rights are contractually protected or subject to the sponsor's discretion.
The takeaway
The Peterson case illustrates that donor-advised funds remain legally owned by the sponsor, regardless of the adviser's historical influence. Operators should proactively track the court's clarification on advisory rights to assess whether their own charitable instruments require restructuring.
Further reading
For additional context on how organizations navigate charitable asset management, see Philanthropy.
Source note: This article includes information reported by The Times of India.
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