A Tale of a Donor Advised Fund, an Endowment Fund, and... a Tortoise?

We here at the JCF admit that, sometimes, trying to explain what a donor advised fund (DAF) is or what an endowment fund is can be a little tricky.

So, since many people care for dogs, cats, or other animals, let's try a pet analogy to hopefully provide some clarity...

Let's say you buy a giant tortoise after it hatches.

Sure, a tortoise may not be cuddly and playful like a puppy or a kitten, but they are known as the longest-living land animal in the world. One tortoise known as Jonathan is upwards of 190 years old!

As you raise this baby tortoise, you will want to ensure her health and well-being, so you will need to pay for food, shelter, veterinary check-ups, and other expenses as needed.

Think of this annual care as what a donor advised fund is for, but for supporting nonprofits instead.

You likely have a checking account to pay for your tortoise's expenses, and a donor advised fund is like your own online charitable giving account to recommend grants for charities you adore. For either a checking account or a DAF, you add money to it, and then it gets paid out when you're ready to do so. A DAF is great for your annual charitable gifts, synagogue memberships, emergency aid support, and so forth.

Now, knowing that your beloved tortoise could very well outlive your own lifetime, you likely will want to put plans in place to make sure that her annual expenses are covered for many decades into the future. You may establish a trust fund in your estate plans to specifically ensure that perpetual payouts from the fund will continue each year indefinitely to help your tortoise thrive when you are no longer here to care for her.

This is similar to how an endowment fund works. Yes-- slow and steady wins the race.

When creating an endowment fund with the JCF using current dollars and/or by creating a legacy gift in your will (or other financial vehicle), your donation will be professionally invested and you will have a signed agreement with the JCF to ensure that your philanthropic wishes are met; from there, every year 5% of the fund's balance is paid out by the JCF for the charitable cause that you include in your agreement.

If you would like to discuss the benefits of a donor advised fund or endowment fund or how they operate (or how amazing it is that a tortoise can live for two centuries), please contact us today at 856-673-2528. Thank you!