No more dealing with receipts: The new donation model arrives in Israel

From managing bank accounts and buying insurance policies to ordering fast food, Israelis are now managing most of their daily activities online. But what about their donations? A new technology product in the philanthropy field is shaking the dust off the world of giving and offering advanced interfaces for managing and tracking donations, together with tools for actualizing maximal tax benefits. Meet the new digital DAF.  

What is a DAF? 

A donor-advised fund is an innovative financial tool that gives donors new possibilities for increasing their impact and maximizing tax benefits for their donations. The model makes it possible to set aside an amount of money intended for donation in advance and thus qualify for a tax deduction even before the money is actually donated. The model comes from the USA: the donor transfers money to the DAF, which is run by a nonprofit, and the donor becomes the advisor who has the authority to decide where the funds will be donated. 

The deposit into the DAF is recognized as a donation and the donor receives a tax receipt for the entire amount before the funds are actually donated to their intended recipients. 

Stop chasing after receipts

The financial model of the DAF is changing the rules of the game in philanthropy. DAF’s are managed by a nonprofit organization, which allows the deposit to be recognized as a donation and to immediately provide donors a tax receipt for the full amount of the deposit. After funds are deposited and the receipt is provided, donors can donate the sum over time, in a strategic and considered way, without having to deal with more receipts. 

Turn your donation into an investment

Because the funds in the DAF are managed by a nonprofit organization, donors receive all the tax benefits to which they are entitled. For example: you can invest the funds in the DAF in the capital markets and enjoy a total exemption from tax on the profits – because nonprofit organizations are tax-exempt. Another example of how you can increase your impact through tax benefits is donation of stock. You can deposit tradable shares into your DAF with no requirement to pay the 25% capital gains tax. This means that if you have profited $10,000 on stocks you have traded, and you choose to donate them to your DAF – you will not pay any tax and the stocks together with the $10,000 profit will be transferred in full. In this way, donors can increase their donation impact by 25%, without paying any additional amount. 

The DAF is also the only digital donation channel that enables you to give donations completely anonymously if you so choose. 

The new world of donations 

The benefits of a DAF are not only tax refunds. Separating the deposit stage from the donation stage creates a window of time in which you can choose the destination for your donations in a considered, strategic way. You can examine the operations of different organizations and make one-time or recurring donations. In addition, you can consult with the account managers to build a donation portfolio that matches your world view and giving priorities. Another important advantage is the option to donate anonymously. Donors who prefer to donate anonymously discover that a DAF is the only digital donation channel that enables them to do this with total anonymity. The donor can choose not to show their name and the nonprofit organization receiving the donation will only see the name of the organization that manages the DAF, alongside the amount donated. 

How do you choose a DAF? 

The funds you donate are your way of influencing reality and therefore, it is important to ensure that they are managed in a secure and trustworthy place. Here are some items that are important to pay attention to before you join any DAF platform:

Digital management versus paper management

Currently DAF’s can be managed from anywhere with a mobile phone. Ask whether the fund you are considering joining has digital registration and which transactions you can do on your own. Ask how deposits to the fund and donations from the fund can be made. Certain places allow you to conduct all transactions digitally, while others will require you to work with a representative. At JGive, you can open an account and make deposits online, without involvement of a third party, and you can access your fund from anywhere in the world. 

Minimum donation amount

Certain funds only allow you to join with a certain minimum donation amount (usually tens of thousands of shekels). At JGive, for comparison, you can open a fund with no minimum initial deposit. 

Payment model

Certain nonprofit organizations charge payments in the form of management fees from the total funds managed in the account or in the form of a monthly fee. Usually, the management fees decrease as the amount of money in the fund increases. The benefit of this payment mechanism is that usually 100% of the donation goes to the intended non-profit beneficiaries.

Another option for charging fees is in the form of a service charge on the amount of the donation. In this way donors benefit from using the fund at no cost, and the non-profit organization that manages the fund deducts a certain percentage of the donation that constitutes participation in the fund’s operating costs. In these cases, it is worthwhile to clarify what percentage of the donation will actually be received by the designated non-profit beneficiary. 

JGive uses both these payment models and donors can choose their preferred option.

Length of time for making donations

The money in the fund cannot stay there indefinitely. After deposit to the fund, donations must be made within a defined time period. This time period can vary from one year to five years, and it is usually impacted by the amount of money in the fund. Different entities may provide different time periods and it is worth comparing them.  

The people behind the product

Organizations offering DAF’s are financial entities and you should ensure that there are professionals overseeing the fund activities. Usually, DAF’s are monitored by committees that oversee the management of donations and their transparency as well as investments in the capital markets and transparency of activities for fund holders. 

Everyone deserves to donate wisely

JGive is a nonprofit organization and the only organization in Israel that enables anyone to open a DAF with a click, with no minimum deposit. The nonprofit organizations that you can contribute to through the interface are all registered non-profits that have a certificate of proper management, for which we conduct periodic due diligence examinations. Our site is a home for donors in Israel and to date more than one million donations have been made through our site to organizations promoting change in Israel.

** The above should not be construed as investment advice, tax advice, recommendation or opinion regarding the viability of investing in financial products of any kind and type, including securities, mutual fund participation units and / or any other financial asset. The above does not constitute a substitute for personal advice, tailored to the client's needs.

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