Author – Kelley Bannon Lashley
Giving back to the community is more than just a nice thing to do; it’s at the core of who we are at Deka Law Group. As part of our community service program, Deka Gives, we recently established a Donor Advised Fund at the Pasadena Community Foundation.
A donor-advised fund (commonly referred to as a DAF) is a giving vehicle that allows donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time. Depending on your needs and giving goals, it can be expendable, invested, or endowed. To learn more about the Pasadena Community Foundation and DAFs click here.
As an employer, I often speak to my team about the importance of giving back to our local community. Through our Deka Gives program, we have participated in holiday toy drives, served meals to families in need, created handmade cards for our military troops and first responders, and planted gardens and cooked meals for families with sick children, to name just a few of the ways Deka employees have supported our community.
In addition to giving our time, I wanted to find a way to empower my employees to give financially to the causes most important to them. So, in 2020, I created the Deka Law Group Fund and made a commitment to not only fund it annually but also allow my team to join me as donor advisors.
This year, each Deka team member has been assigned one month in which to select a local nonprofit recipient of a $1,000 grant from the Deka Law Group Fund. We will highlight team members and grant recipients on our social media pages to raise awareness of the causes most important to us.
Of course, one of my goals for the fund is to continue to grow it so that we can make an even bigger impact on our local nonprofit community. I also want to diversify the causes we support. But my greatest hope is that I will have inspired a legacy of giving within my team.
For many clients, a DAF is a more flexible and less expensive alternative to a private family foundation. A donor establishes a fund within a sponsor organization from which the sponsor will, after consulting with the family, make distributions to other charitable organizations. For tax purposes, the donor has made a gift to the public charity sponsoring the fund; thus, the gift from the donor qualifies for the most favorable tax treatment possible.
A DAF offers many of the advantages of a private foundation; however, the defining characteristic of a DAF, and its main disadvantage, is a requirement that donors not have control over the contributed funds. A donor and his or her family retain the right to make nonbinding recommendations to the sponsoring charity about how the fund will be applied.
The sponsoring charity is free to accept or reject that advice. As a practical matter, a donor’s advice is typically followed unless the recommended grantees are not properly qualified organizations.
One major advantage of a DAF over a private foundation is that all administrative matters, such as record keeping, preparation of checks, tax returns, and so on, are handled by the sponsored charity and not the donor. This enables donors to avoid the burden of handling administrative matters and associated expenses. Thus, when absolute control over contributed funds is not necessary, a DAF is a great vehicle to make charitable contributions without having to deal with the costs and administrative issues associated with private foundations.
Want to learn more about DAFs and if they are right for your family or company? Contact one of our expert attorneys here at Deka Law.