The benefits of donor-advised funds (DAF) are many — including simplifying tax breaks, saving time, easing stress, and, of course, aiding charitable organizations — but the concept isn’t necessarily easy to understand. “Sometimes, the best way to explain the benefit of DAFs is to have a conversation with someone who’s had a positive experience,” said Yaffa Karp, senior development officer at Jewish Community Foundation (JCF) of the Jewish Federation of Greater MetroWest New Jersey. “Our board members are excited to have conversations with other members of their synagogues.”
In an incentive program launched last month for new purchasers of donor-advised funds, JCF will donate $100 to the purchaser’s synagogue.
The donations to synagogues are being paid in part by JCF and in part by funds provided by lay leaders.
“The $100 is just in gratitude for them sharing the idea of DAFs with their communities,” said Karp.
Beyond the synagogue incentive, JCF’s DAFs offer a way to organize and cluster charitable giving, with added benefits to the local
In time for end-of-year giving, NJJN spoke over the phone with Karp and Michal Werner, assistant executive director of the Jewish Community Foundation, about how DAFs work, who benefits, and what the JCF offers donors.
History: JCF, the legacy and endowment arm of federation, has been in existence since 1949. While the year the DAFs were established is not known, they have been around for more than 25 years. JCF is the second-largest community foundation in New Jersey (the first is the Community Foundation of New Jersey) and among the top 10 Jewish community foundations in North America in terms of assets under management. JCF has a total of $480 million in assets in more than 740 funds. Of that amount, $185 million is in about 350 DAFs.
Minimum gift: A DAF can be opened with a minimum gift of $5,000. No matter when grants are made from the fund, tax benefits are immediate, according to Werner, so it’s a way to manage charitable giving efficiently.
How it works: Holders of these funds can make grants to any qualified 501c3 charity by letting JCF know either by phone, email, or through an online portal. After confirmation from the donor, JCF writes the checks and keeps track of giving. Werner likens it to “a charitable checking account.”
With a DAF there is no minimum amount for annual giving. In contrast, for example, private family foundations are required to donate 5 percent annually.
Fees: Funds of $5,000-$10,000 incur an annual fee of $175. For funds of $10,000-$1 million, there’s a 1 percent fee. Over $1 million a sliding scale that keeps dropping, so up to $3 million is half a percent and it continues to go down from there.
How DAFs benefit the Jewish community: Opening a DAF through JCF benefits the Jewish community in at least two ways: First, because checks come from JCF, recipient organizations will know that the gift is coming from the Jewish community — something that Werner points out is not necessarily the case when a check comes from an individual. “Every check out the door shows the JCF logo,” said Karp. “Basically, it’s goodwill for the Jewish community.”
Second, the fees are invested back into the local Jewish community. In addition to covering some operating expenses, the fees are folded into JCF’s grant-making programs and contribute to the $4 million JCF donates to federation’s annual campaign.
Added benefits: Through the JCF’s Center for Strategic Philanthropy, Werner, Karp, and other staff members provide conversations about family philanthropy. That could mean discussing how to use funds in the most impactful ways or checking the legitimacy of a particular charity. The center can also research organizations in a particular interest area to find the best fit, and at higher levels of giving, set up meetings with CEOs of those organizations. JCF professionals at federation can also facilitate conversations about family philanthropy and next-generation giving.
Karp recalled a donor whose grandchild had been to Africa and urged him to support a small organization there. “We were able to check the organization was legitimate through reviewing its 990s and emailing with its executive director,” she said.
Regarding family philanthropy, Karp said, “We have the tools and resources to have conversations about a family’s values and what would align with those values.” For instance, if a family was interested in giving to education, she might help them to refine their interest by exploring whether they want to focus on higher education, day school education, or maybe special needs education, and then refine it again by looking at whether they are more interested, for example, in funding leadership initiatives or scholarships.
The DAF can also serve as a way to model and share the value of giving for future generations. “Giving a child or grandchild a $10,000 donor-advised fund as a bar or bat mitzvah gift or as a college graduation gift teaches that it is important to give back,” said Werner.
An added benefit is strengthening relationships across generations, according to Werner. “Family members all discussing where they gave helps them learn so much about each other,” she said, because it creates a conversation about what’s important to them.
Limitations on charities: Almost any charitable organization is eligible, regardless of whether or not its mission is Jewish. It could be an environmental or health-care organization or one focused on reducing homelessness or food insecurity, for example.
Every requested grant is screened by the DAF review committee, and the foundation will not make a grant to an organization not aligned with the values of Jewish Federation of Greater Metro-West NJ. Those principles include “strengthening communities in Greater MetroWest, in Israel, and around the world and pursuing the Jewish values of klal Yisrael and tikkun olam,” according to an email from Werner. In the last five years, only two requested grants have been rejected by the committee; JCF did not disclose additional information on those grants.
Deadline for 2019 gifts: To guarantee that checks will be written for the 2019 calendar year, all initiation of gifts must be submitted by Dec. 15, 2019.