Attending the Jewish Community Foundation of Greater Phoenix’s (JCF) recent program “The Grandest Love: Inspiring the Grandparent-Grandchildren Connection” with author and former Chicago JCCs executive director Jerry Witkovsky reminded me of how as a grandparent or parent we can create a family tradition of giving that might be one of the most important legacies of all to pass on to the next generation. Teaching by example is the most powerful lesson. Like someone once said, “We make a living by what we get, but we make a life by what we give.”
There are a variety of ways to give, but I want to focus on the fastest-growing charitable vehicle, Donor Advised Funds (DAFs), which are used by teens, young tech billionaires, retired teachers and everyone in between.
What makes donor-advised funds so popular?
Gifts to donor-advised funds are tax-deductible in the year of contribution. Donors can deduct up to 50 percent of adjusted gross income (AGI) for cash gifts and up to 30 percent of AGI for gifts of appreciated securities held at least a year, as well as real estate and other assets. You can eliminate capital gains taxes on contributions of long-term capital gain property. With a DAF you have “charitable choice” and planning benefits. You can advise grants to more than 1 million IRS-qualified 501(c)(3) charities. Those include most well-known and many lesser-known, but deserving, nonprofit organizations. Donors can maximize time and efficiency by making grant recommendations in advance and can schedule recurring grants to charities.
Another benefit to creating and using DAFs is there is almost no maintenance and minimal paperwork. Gifts to donor-advised funds are tax-deductible and donors should keep those records. Those are the only donation records you need – whether your fund makes 10 or 10,000 grants to charity. This simplifies tax preparation paperwork, and there is almost no other administrative maintenance. These DAFs work well on their own and with other charitable vehicles. Donors can make donor-advised funds successors to charitable trusts and IRAs.
Locally, DAFs constitute over one-third of the total assets administered by JCF. DAFs are individual charitable funds created in your name, or in a name that you choose, for the purpose of fulfilling philanthropic goals. These types of funds allow you to make a tax-deductible contribution when it is most convenient for you and then allows you to recommend contributions over time to qualified nonprofit organizations in the Jewish and general communities.
Establishing and using a DAF is easy to do. If you choose to set one up with JCF, the agency will provide you with a simple agreement. All you need to do is to transfer cash, marketable securities or other assets to the foundation with a value of $10,000 or more. The fund can be set up over time for those who don’t have the $10,000.
Once the fund is established, you have the ability to support causes that interest you now and in the future. Donors may make recommendations for distributions to qualified public charities with the approval of the foundation. You have the option of making distributions on your own timetable. You can make distributions to qualified Jewish and non-Jewish charitable causes, locally, nationally or internationally, and you can make them online, anywhere, anytime.
Additional contributions are always accepted in any amount and at any time, which can help you to better manage your tax liability in the future.
There is no tax owed on income generated by the fund, thereby increasing the amount available for charitable distributions. Establishing a DAF can simplify your record-keeping – providing you with necessary tax acknowledgements, quarterly reporting of fund activity and a year-end summary. Distributions can be done anonymously if you prefer and your donor-advised fund will have professional investment management. Lastly, you can pass on the right to make recommendations from the fund to your next generation, thereby teaching the next generation the lessons of tzedakah.
For further information, contact your financial, tax and legal advisers or JCF, 480-699-1717.
Lee Eisinberg is a board member of The Jewish Community Foundation of Greater Phoenix. Contact him at 480-258-6098 or Eisinberg@cox.net.