Complete Guide to Donor-Advised Funds
Donor-advised funds (DAFs) are a type of charitable giving vehicle that allow individuals, families, and organizations to make a charitable contribution, receive an immediate tax deduction, and then recommend grants to charitable organizations over time.
DAFs have grown in popularity in recent years as a way for donors to simplify their charitable giving and make a greater impact.
While DAFs were previously only available to the wealthy, Groundswell makes the benefits of a donor-advised fund accessible to everyone.
In this article, we provide a complete guide to donor-advised funds, including how they work, their benefits and drawbacks, and how to set one up.
How do donor-advised funds work?
When a donor makes a contribution to a DAF, the funds are invested and managed by a sponsoring organization.
The donor receives an immediate tax deduction for the contribution, and can then recommend grants to charitable organizations at any time. The sponsoring organization is responsible for managing the DAF and distributing the grants as directed by the donor.
One of the main benefits of DAFs is that they allow donors to make a charitable contribution and receive an immediate tax deduction, even if they are not ready to decide which charities to support.
This can be especially useful for donors who want to make a charitable gift but are not sure which organizations to support, or for donors who want to spread their charitable giving out over time.
Learn the difference between a private foundation and a donor-advised fund
Benefits of donor-advised funds
There are several benefits to using a DAF for charitable giving, including:
Simplicity: DAFs are a simple way to make charitable contributions, as donors can make a single contribution to the DAF and then recommend grants to multiple charities over time.
Immediate Tax Deduction: Donors can receive an immediate tax deduction for their contribution to a DAF, even if they are not ready to recommend grants to charitable organizations.
Professional Management: DAFs are managed by a sponsoring organization, which means that donors do not have to worry about managing the investment of the funds or distributing the grants.
Flexibility: Donors can recommend grants to any IRS-qualified charitable organization, and can change the organizations they support at any time.
Anonymity: Donors can remain anonymous when making a contribution to a DAF or recommending a grant, if they choose.
How to set up a donor-advised fund
Setting up a donor-advised fund (DAF) is a simple process that can typically be done online in a few easy steps:
Choose a sponsoring organization: There are many different organizations that sponsor DAFs, including community foundations, financial institutions, and charitable organizations. Choosing a reputable organization that aligns with the donor's charitable goals is important.
Groundswell is a flexible choice for small to enterprise-sized businesses looking to provide a charitable giving platform for their employees.
Learn to open a DAF account with Groundswell.
Make a contribution: The donor can make a contribution to the DAF using cash, securities, or other assets. The donor will receive an immediate tax deduction for the contribution.
Recommend grants: The donor can recommend grants to charitable organizations at any time, either online or by contacting the sponsoring organization.
Monitor the DAF: The donor can monitor the activity of their DAF and recommend additional grants as desired.
Donor-advised fund tax deduction information
One of the main benefits of donor-advised funds (DAFs) is that they allow donors to receive an immediate tax deduction for their charitable contributions. The tax deduction for DAFs is generally the same as it would be for a charitable contribution made directly to a charitable organization.
To be eligible for a tax deduction, the donor must itemize their deductions on their tax return and the contribution must be made to a qualified charitable organization. Contributions to a DAF are tax-deductible in the year that they are made, even if the donor does not recommend any grants from the DAF until a later year.
It is important for donors to keep in mind that there are limits on the number of charitable contributions that can be deducted each year.
Limits for charitable contributions that can be deducted for the tax year 2022
The limits on the number of charitable contributions that can be deducted for the tax year 2022 depending on the type of organization to which the donation is made and the taxpayer's filing status.
For the tax year 2022, the limits are:
For donations made to public charities and certain private foundations, the limit is generally 60% of the taxpayer's adjusted gross income (AGI).
For donations of appreciated capital gain property made to public charities and certain private foundations, the limit is generally 30% of AGI.
For donations made to certain private foundations and veterans organizations, the limit is generally 30% of AGI.
For donations of appreciated capital gain property made to certain private foundations, the limit is generally 20% of AGI.
It's always recommended to check with a tax professional or the IRS to confirm the limits that apply to your specific situation.
It is also important for donors to retain documentation of their contributions to a DAF, as they may be required to provide proof of their charitable contributions in the event of an audit.
Software like Groundswell keeps track of all the important information you need come tax time.
Donor-advised funds distribution rules
The distribution rules for donor-advised funds vary depending on the specific terms of the fund and the sponsoring organization. In general, however, the following rules apply:
- Donors must make an irrevocable contribution to the fund in order to participate. This means that the donor cannot change their mind and take the money back after making the contribution.
- Donors can recommend how their contributions are invested and how the earnings are distributed to charitable organizations, but the sponsoring organization ultimately has the discretion to approve or deny the recommendations.
- Donors cannot receive any personal benefit from the fund, such as the use of donated assets for personal purposes or the receipt of goods or services in exchange for their contribution.
- Distributions from donor-advised funds must be used for charitable purposes. This means that the funds must be used to benefit a charitable organization or to support a charitable program.
- Donors must follow all applicable federal and state laws, including laws related to self-dealing and excess benefit transactions.
- Sponsoring organizations may have additional rules and requirements for donor-advised funds, such as minimum contribution amounts or distribution frequencies. It is important for donors to understand and comply with these rules in order to maintain the tax-advantaged status of their contributions.
How Groundswell uses the DAF to enable corporate giving programs.
Groundswell is a corporate giving platform revolutionizing access to DAFs.
Donor-advised funds power Groundswell accounts. Groundswell’s DAF infrastructure gives companies and their employees a better, smoother experience when compared with traditional workplace giving programs.
With Groundswell, companies can deposit gifts directly into their employees’ accounts.
Groundswell’s infrastructure also enables privacy and security for employees and employers. Since charitable giving can be deeply personal, adding a level of privacy aids in fostering a corporate culture of generosity and giving.
Learn more about setting up a corporate giving program and DAF with Groundswell.
Related resources
Unlocking Philanthropy: A Ready-to-Use Corporate Giving Policy for Modern Businesses
Sample Corporate Giving Policy You Can Use Today
In today’s socially conscious environment, more companies than ever are recognizing the value of corporate philanthropy. Not only can a robust giving policy boost a brand’s image and reputation, but it can also play a pivotal role in community development and global betterment. If your company is considering the establishment of a formal corporate giving policy or refining its existing strategy, this sample policy might be the perfect starting point for you.
Pillars of a Strong Corporate Giving Policy
Corporate giving programs range from employer donation matching programs to full blown corporate social responsibility programs with grantmaking and volunteerism. Many companies find somewhere in the middle that aligns with their size, budget, geographic presence and most importantly company values and commitment to diversity and inclusion. But what truly makes a corporate giving policy stand out? Let’s delve into the key features, from donation matching to the strategic use of platforms like Groundswell.
1. Donation Matching: Doubling the Impact
One of the most effective tools in a giving policy is donation matching. This is where companies match employee donations to eligible non-profits, effectively doubling the contribution. Such programs not only amplify the impact but also motivate employees to participate, knowing their chosen cause will receive twice the support.
2. Charitable Stipends: Encouraging Employee Choice
Charitable stipends are allowances given to employees to donate to a non-profit of their choice. This not only encourages a culture of giving but also empowers employees to support causes they’re passionate about. The stipends can be a fixed amount annually or can vary based on the employee’s role or tenure.
3. Dollars for Doers: Volunteering Translated to Contributions
“Dollars for Doers” programs convert volunteer hours into monetary donations. When employees volunteer their time for a cause, the company makes a donation equivalent to the hours spent. This fosters a culture of hands-on involvement and ensures that both time and money are being donated to valuable initiatives.
4. Corporate Grants: Sowing Seeds for Bigger Change
Beyond individual employee contributions, companies can set aside a dedicated fund for corporate grants. These grants can be given to non-profits, research initiatives, or community projects that align with the company’s CSR objectives. Such grants can lead to substantial, long-term changes and foster strong partnerships with community leaders and organizations.
Why Choose Groundswell for Your Giving Initiatives?
Incorporating these elements into a giving policy requires streamlined management, transparency, and ease of execution. This is where platforms like Groundswell come into the picture.
Groundswell offers an efficient and affordable solution for companies aiming to elevate their philanthropic endeavors. Here’s why it’s the ideal choice:
- User-Friendly Interface: Groundswell’s platform is designed for both companies and employees, ensuring smooth navigation and straightforward donation processes.
- Versatility: Whether it’s donation matching, handling charitable stipends, or managing corporate grants, Groundswell offers solutions tailored to each company’s unique needs.
- Cost-Effective: Groundswell provides a comprehensive suite of tools at competitive prices, ensuring that more of your money goes towards the cause rather than platform fees.
- Transparency: Track donations, monitor employee involvement, and generate detailed reports to measure the impact—all in one place.
Conclusion
An effective corporate giving policy is a blend of structure, employee engagement, and impactful contributions. By incorporating elements like donation matching, charitable stipends, “Dollars for Doers,” and corporate grants, businesses can create a ripple effect of positive change. And with platforms like Groundswell, executing these initiatives becomes not just feasible but also highly efficient and cost-effective.
5 Tips to Boost Engagement & Impact on Giving Tuesday
Leverage GivingTuesday to boost generosity
Every November, the Tuesday after Thanksgiving is known as GivingTuesday, which often serves as the unofficial start of end-of-year giving campaigns. This comes on the heels of holiday shopping deals on Black Friday, Small Business Saturday, and Cyber Monday. It is a worldwide phenomenon, inspiring millions to lean into the end-of-year holiday spirit with generosity and compassion. For many charities, GivingTuesday has become their biggest day for donations – and can help resource their ability to have an even greater impact in the year ahead.
For companies, GivingTuesday and the end-of-year giving season offers an opportunity to double down on their commitment to social responsibility, strengthen relationships with employees, and boost their impact in the community and broader world.
At Groundswell, we partner with companies all across the country to design and launch GivingTuesday campaigns – leveraging our easy-to-use platform that makes it easy for employees to participate and send donations to the causes and charities that they care most about. Below are some best practices to boost engagement and inspire generosity during the giving season.
1. Make Giving Easy:
A lot of giving platforms out there make it incredibly hard to donate. Some don’t have all 1.5 million IRS-approved charities listed. Others require employees to navigate through a web of intranet or sharepoint sites to find the giving program landing page. And others require that HR is notified of any donations an employee wants to make. At Groundswell – we are committed to removing all of the friction, and ensuring that employees can find charities easily, through a platform that is accessible from the palm of their hand, so they can give whenever they want to.
2. Launch a GivingTuesday Match Campaign:
Through Groundswell you can customize and launch a special GivingTuesday match campaign in a matter of minutes. Simply pick the nonprofits to include in the special campaign, select the start and end-date for the campaign, and then determine the match – 2x, 3x – along with any overall budget limits, then you’re done!
3. Boost engagement by involving ERGs:
Share nonprofit recommendations from Employee Resource Groups to provide inspiration around causes and nonprofits that matter to your employees. You can feature these nonprofits on dedicated ERG Corporate Spotlights and Campaigns that will be visible to all employees on their Groundswell dashboard.
4. Surprise (and Delight) Employees With A Gift to Give:
Consider sending a surprise “gift to give” to reward those already participating in your giving program (and to incentivize others to enroll). These gifts might be used to further maximize impact through the existing campaign, or to donate to other nonprofits your employees care about. Groundswell’s custom gift feature allows companies to easily schedule and send gifts with little to no administrative burden.
5. Level up with Volunteer Matching:
Groundswell’s Volunteer Matching program – sometimes known as Dollars for Doers – recognizes that some employees may not have funds to contribute, but have time – and rewards them in the same way. It’s an inclusive approach that invites everyone to participate in GivingTuesday, even those who may not be able to donate their own funds.
12 Employee Benefits Survey Questions Modern Companies Should Ask
In today's business environment, having the right and highest performing talent is more critical than ever. With benefits packages playing a vital role in these decisions, how can companies truly gauge their effectiveness? By initiating regular employee benefits surveys.
Scroll down for a free survey template below.
Let's dive in to the importance of asking the following questions.
Is our workforce satisfied with the current employee benefits package?
Gaining insights from "how satisfied are you with our company’s benefits package?" can offer companies a quick pulse on the effectiveness of their benefits. A dip in satisfaction might signal a need for re-evaluation, especially if you're looking to maximize your budget.
How comprehensive are the employee benefits we offer?
Do employees feel that the organization covers a wide range of their needs? Asking, "do you feel our benefits package is comprehensive in its offering?" can shed light on any potential gaps in coverage.
Are we showing true commitment to Diversity, Equity, & Inclusion through our benefits?
Are the company's efforts in promoting DE&I resonating? This can be gauged by asking if the benefits genuinely support diversity and inclusion. If they aren't, here's an opportunity to collect ideas directly from your employees.
Read more about how to make sure your giving program is equitable and inclusive.
Do our benefits reflect our company culture and values?
The question, "do you feel our benefits package supports our cultural values?" will highlight any potential discrepancies in practicing what you're preaching.
Did you know? Two-thirds of employees say it’s important for a company to align to their values.
Are we catering to the needs of a remote or multi-location workforce?
With remote work on the rise, is the company adapting its benefits accordingly? It's essential to find out if employees feel supported, regardless of their work setting.
Would employees recommend the company based on our benefits?
This is an easy one to skip, but it's a great question to ask. See how influential your benefits package is for employee referrals. Determining if employees would advocate for the company based on its benefits can be a key metric for recruitment.
How do specific benefit categories fare?
By querying satisfaction levels across various benefits – physical health, social impact, mental health, financial health, and fringe benefits – can companies discern which areas are thriving and which need enhancement?
What additional benefits do employees desire?
Is there a particular benefit that could make a difference in employee satisfaction and retention? Discovering this can be as straightforward as asking, "if you could choose one benefit not currently offered, what would it be?"
If your workforce desires a more meaningful benefit, see why decentralizing your corporate philanthropy strategy can achieve greater impact at scale.
How often should I send an employee survey about our benefits?
While every business has their own set of unique needs, conducing a quarterly employee survey at minimum can help you get a pulse check.
There will be some natural and unplanned peaks in valleys throughout the year that can drastically affect employee morale and company culture. By proactively seeking feedback through surveys, companies can foster a culture of continuous improvement, ensuring they remain at the forefront of employee satisfaction.
What are some affordable benefit options we can provide employees?
Corporate matching or giving programs can be a low-cost addition to your benefit offering that supports your employees’ unique passions and perspectives through charitable giving and boosts your company’s commitment to social impact. Groundswell offers a comprehensive solution with a simple implementation and nearly zero administration burden.
- How satisfied are you with our company’s benefits package?
- Do you feel our benefits package is comprehensive in its offering?
- Do you feel our benefits package supports our cultural values?
- Do you feel our benefits package supports our commitment to Diversity & Inclusion?
- Do you feel our benefits package supports our remote or multi-location workforce?
- How likely are you to recommend applying based on our benefits package?
- How satisfied are you with our physical health benefits (i.e. health care, sick leave, etc)?
- How satisfied are you with our social impact benefits (i.e. corporate matching, volunteering, etc)?
- How satisfied are you with our mental health benefits (i.e. vacation time, EAP, etc)?
- How satisfied are you with our financial health benefits? (i.e. retirement, student loan assistance, etc)
- How satisfied are you with our fringe benefits and perks? (i.e. fitness subsidies, stipends, etc)
- If you could choose one benefit not currently offered, what would it be?