Mark Zuckerberg is a trendsetter. He is doing what all donors should consider doing. He wants to give back to his community, he wants to stay connected to his donation and he does not want to take on all the administrative work that comes with social investment. That’s why Zuckerberg gave 18 million Facebook shares, valued at $498.8 million to start a donor advised fund (DAF) with a community foundation.
Frederick Schoenbrodt , a board member at the Community Foundation of New Jersey, highlights the benefits of DAFs as opposed to a private foundation and why Zuckerberg has chosen it as his personal philanthropic vehicle. “In [the case of donor-advised funds], the donor retains responsibility for the ‘fun part’ of philanthropy, i.e., recommending grants to organizations and purposes that further the donor’s philanthropic vision while remaining completely free from the burdens and rules imposed upon private foundations by the IRS and various state laws regulating charities.”
Donors and their investment advisors realized the benefits of giving to community foundations especially in 2012 as there were uncertainties in how the tax code was going to be changed. The WSJ notes that donor advised funds allow “the charitably minded to contribute assets and take a full deduction for 2012, yet postpone giving decisions.” The proof is in the numbers. From July 2012 to December 2012, banks have reported triple the amount of DAF accounts opened and contributions made to them than in the same period of time years before.
It’s clear that Zuckerberg, like many of us, wants to know where his dollars are being allocated. He wants to take part in choosing projects, and he wants results. This is an era of new giving. Donors no longer see giving just as financial contribution. Donors want to be smart with their investments. Philanthropic giving through a DAF provides flexibility for smart social investments. It allows donors to choose multiple causes to fund and to engage in projects themselves, rather than handling operational matters.
Making smart stock investments
Using a DAF for his giving was not the only smart decision Zuckerberg made. Giving stocks over cash is what Zuckerberg decided to do with his donation as well. This technique is much better than selling stock and then donating. Had he done that, he would have been left with $500 million in taxable capital gains and a $500 million in deductible. By giving stock to a public charity, Zuckerberg had zero taxable capital gains. Better yet, he was able to deduct $500 million (the value of the stock when given). The good part of donating publicly traded stock is that you are allowed to deduct the securities’ full market value – which eliminates both a 15% capital gains tax and state capital gains tax as high as 11%. And, Zuckerberg smartly made use of that opportunity.
Choosing the right vehicle
Characteristic donors to community foundations, like Turkish Philanthropy Funds, are especially passionate about a specific community. In our case it is Turkey. Here at Turkish Philanthropy Funds, we have helped donors to build schools, fund learning centers, engage youth and empower women in Turkey. TPF has often linked donors with organizations that are making an impact in their hometown. We work within four main cause areas that gives the donor the freedom to choose project that cater to their specific interests. We are honored to be making a difference in our communities one philanthropist at a time no matter how large or small your contributions are.
Lastly, an added benefit of donor advised funds at TPF is that your funds not only enable the growth of diaspora funds going to Turkey, but give you the option to give within the U.S., thus making you philanthropically engaged in both countries.
Contact us for further information on starting your own donor advised fund with TPF: (646) 530-8988 or email firstname.lastname@example.org.