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WEALTH MANAGEMENT UPDATE ON DONOR-ADVISED FUNDS
More than $120 billion is currently held in donor-advised funds (DAFs), and grants from DAFs to charities have nearly doubled in the past five years. Virtually unknown to the public a decade ago, the charitable savings accounts are the fastest-growing gift vehicles in the philanthropic world. Three Chicago-based philanthropy executives shared their DAF insights and updates with Crain’s Content Studio. How is your organization involved with DAFs? Rose L. Jagust: The Jewish United Fund/Jewish Federation of Chicago provides humanitarian aid for over 500,000 people of all faiths in need in Chicago, millions in Israel and across the globe. Our DAF program has operated since 1971 and is among the oldest providers in the country. The program has grown to almost 1,000 funds and manages assets of approximately $215 million. In 2019, our donors contributed $39.5 million to thousands of charities, Jewish and secular, supporting nearly every type of charitable cause. They’re particularly passionate about education, human services, health and medical research, and building the Jewish community. Jewish Federation of Chicago professionals work with donors of all ages and incomes from throughout the Chicago area, helping them to be better informed, savvy philanthropists. We pride ourselves on working with multiple family generations, helping them act on their charitable interests and pass along their charitable legacies. Phil Zielinski: Mercy Home is a children’s charity based in Chicago that offers solutions for kids affected by abuse, neglect, violence, homelessness or other traumatic experiences. Because we’re a 501(c)(3) nonprofit organization, we often receive grants from DAFs to
throughout the country. We now work with fund holders from over 40 states, and our program has more than 2,000 funds and assets of almost $2 billion. Our annual DAF grants typically total more than $325 million, and in this extraordinary fiscal year we’ve distributed $500 million so far. Whether DAF holders’ giving is focused in Chicago or beyond, donors have the opportunity to learn about issues important to our region and connect with the Trust’s work to build a thriving, equitable and connected region. What’s the most common question or concern you’re hearing regarding DAFs? Zielinski: People ask if a DAF is right for them. Our response is that a DAF is an excellent tool for anyone who’s charitably inclined, looking for a tax deduction and wants to avoid the administrative costs of a family foundation. It’s the perfect way to start a family conversation about giving back, and is also a great way to consolidate complex assets—such as business interests, closely-held stock or real estate—into a single philanthropic account. Carlson Vogen: As a community foundation serving the Chicago region, donors often ask if they can support organizations and causes outside Chicago through their DAFs. Our program enables fund holders to make
“ . . . A DAF IS AN EXCELLENT TOOL FOR ANYONE WHO’S CHARITABLY INCLINED, LOOKING FOR A TAX DEDUCTION AND WANTS TO AVOID THE ADMINISTRATIVE COSTS OF A FAMILY FOUNDATION.”
ROSE L. JAGUST
VP - Donor Advised Funds JUF/Jewish Federation of Chicago rosejagust@juf.org 312-357-4954 donors use their funds for both large and small donations to charity. We also mandate that donors give out at least the interest earned on their funds each year and even as our assets continue to grow, our aggregate giving has stayed in the 20 percent to 30 percent range.
KRISTIN CARLSON VOGEN
Senior Director Philanthropic Services The Chicago Community Trust kvogen@cct.org 708-527-1396 What’s driving the current interest in DAFs? Zielinski: I think the best explanation for their growth is that donors see them as a simple, cheap and flexible way to give to their favorite charities. A donor can contribute to a DAF when it makes
PHIL ZIELINSKI
Director - Philanthropy Mercy Home for Boys & Girls phizie@mercyhome.org 312-738-9527
sense, but doesn’t have to distribute to the charity right away. This donor receives a charitable tax deduction when the gift is made, and can be more strategic in planning their philanthropy in the long term. The DAF streamlines recordkeeping too, because even if the donor gives to multiple charities in a
SMART PHILANTHROPY
- PHIL ZIELINSKI, MERCY HOME FOR BOYS & GIRLS support our young people on their path to healing. Mercy Home is more than 99 percent privately funded, which means that the vast majority of donations we receive come from individual donors. We’ve seen a dramatic increase in the number of gifts from DAFs in the past few years, and are committed to helping our donors increase their impact on the philanthropic sector while simplifying their giving through DAFs. Kristin Carlson Vogen: Since our founding in 1915, donors have entrusted their philanthropic dollars with The Chicago Community Trust to address the region’s pressing needs. Beginning in the mid-1980s, we offered donors the opportunity to give during their lifetimes and extended the capacity to give beyond Cook County to nonprofits
grants to qualified 501(c)(3) public charities anywhere in the country. Increasingly, we field questions from nonprofits asking how to access DAF grants. Individual donor cultivation remains the primary way to access this increasingly popular giving vehicle. Jagust: There’s been a lot of talk over the last few years regarding the substantial growth in the amount of money being held in DAFs and the issue of whether that money is being warehoused rather than used for charitable purposes. Specifically, there’s concern that DAFs are being used by the wealthy only for the purpose of obtaining a large charitable deduction. At the Jewish Federation, we have DAFs of all sizes, from a few thousand dollars up to funds with millions, and our
DONOR ADVISED FUNDS Manage all your charitable donations in one place! A Donor Advised Fund at the Jewish Federation of Chicago is an easy-to-use charitable giving account that ensures your dollars have maximum impact at numerous charities. Take advantage of the highest tax deductions available, invest your dollars tax-free and benefit from professional management of your account—get started with a contribution of just $1,000.
Talk to one of our experts today about how you can make your charitable giving simple, effective and smart.
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