In a first, Israeli philanthropists – and overseas funders operating in Israel – can now create donor-advised funds, enabling them to set aside money for future charitable giving without having to establish a private foundation.

Through Keshet, a new nonprofit public benefit corporation established by Jewish Funders Network-Israel, the Institute for Law and Philanthropy at Tel Aviv University, and Committed to Give, Israelis will be able to access the tax benefits and expert services long enjoyed by the hundreds of thousands of Americans with donor-advised funds. And with philanthropy made easier, giving by Israelis – who currently donate about half as much of their disposable income on average as Americans – is expected to dramatically increase.

Overseas foundations that allocate money in Israel are also eligible to open donor-advised accounts through Keshet, saving them the expense and hassle of operating an office in Israel. Some the largest Jewish foundations in the United States – including Baltimore’s Harry and Jeanette Weinberg Foundation and the Russell Berrie Foundation in New Jersey – have already opened such accounts.

The Keshet model is similar to the American system of donor-advised funds, in which, individuals put money into an account reserved for charitable giving, one that is shielded from taxes and managed by a communal foundations or other sponsoring entities. Such funds provide individuals with immediate tax benefits, save them the startup and infrastructure costs of operating a private foundation and enable them to make strategic giving decisions. Like many DAF managers in the United States, Keshet vets the charities receiving grants to ensure they meet certain standards.

Aware of the concern that some American donor-advised funds (DAFs), which are not required to allocate regularly to charitable beneficiaries, allocate too small a portion of their overall holdings, Keshet-DAF’s organizers and the Israeli government took steps to create a new model in which donor-advised funds are incentivized to allocate their holdings.

Keshet donor-advised funds differ from American donor-advised ones in two ways:

  1. American DAFs have no payout requirement, meaning that much of the money in these funds sits idle rather than going to charity, but the Israeli DAFs managed by Keshet have payout requirements that vary depending on the size of the DAF. Accounts of up to 100,000 Israeli NIS (approximately $30,000) must allocate all the money within one year; accounts from 101,000 to 1 million NIS must allocate all the money within five years; accounts of 1,000,001 NIS must pay out at least 5 percent of the total account each year.
  2. While some American DAF managers (such as Fidelity) are for-profit, with a revenue model based on maximizing management fees, Keshet is a public benefit corporation whose mission is to promote giving. Keshet’s management fees are intended only to cover administrative costs, and are not meant to be a revenue source. Any profits generated will be donated.

On average, Israelis donate just 1 percent of their disposable income, compared to Americans who donate 2 percent. (See the Committed to Give/Institute for Law and Philanthropy study: http://jfn.org.il/wp-content/uploads/2018/05/Giving-in-Israel-survey.pdf comparing Israeli giving to Giving USA data.) And while approximately 120,000 Israelis have available assets of at least $1 million, fewer than 1% of them donate at least $30,000 annually to nonprofit organizations.

“Philanthropy hasn’t caught up yet with the rise in economic ability and financial resources that exist for Israelis nowadays,” said Dafna Meitar-Nechmad, a JFN board member and founder of the Institute for Law and Philanthropy at Tel Aviv University. “Keshet makes it easier for donors to give, and we believe it will draw more people to the field.”

In particular, Meitar-Nechmad noted, Keshet is perfect for Israeli entrepreneurs whose startups are going public or are being sold, or for anyone else receiving a sudden infusion of cash, because “You can put aside a certain amount of the money and enjoy the tax benefits right away, and then have time to make a decision about how to allocate the money.”

Rami Amar, who opened a Keshet donor-advised fund with the money he earned from selling his data-infrastructure company, Alooma, to Google, called Keshet “the right thing at the right time.” Amar, who is 38 and lives in the Galilee, said he and his wife use their Keshet fund all the time to make grants to a variety of Israeli nonprofits, particularly ones focused on the environment, peace, and on strengthening Israel’s democracy. “It’s a pretty simple process, and it works great,” he said.

Maya Natan, CEO of Keshet and executive director of JFN-Israel, which launched in 2008, said, “Early on, we realized that two factors discouraging giving in Israel were inadequate tax incentives and the lack of a donor-advised fund infrastructure. Keshet-DAF eliminates these obstacles and will greatly complement JFN-Israel’s work to both foster communications among funders and encourage funders to be more strategic.”

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