For NIF donors thinking about creative ways to help NIF meet this critical and challenging moment in Israel, and at the same time support the causes you care about in the United States and in Israel, we bring you this story from longtime NIF donor Fred Hertz. In 2021, Fred and his husband reached out with a creative strategy for funding a new donor-advised fund in NIF’s Progressive Jewish Fund (PJF)—which just happens to be America’s only national, progressive Jewish Donor Advised Fund (DAF) program.
Ten years ago, Fred and his husband purchased a condominium out of foreclosure as a rental property at a very low price. The value increased significantly over time, meaning a sale of the property would result in considerable capital gains liability. When they decided to sell, they wanted to find a way to use some of the profit to make more and larger charitable gifts, and save on the capital gains taxes at the same time.
Jen Spitzer, NIF’s VP of Finance and Operations, who oversees PJF, interviews Fred about this interesting approach to giving and their decision to set up a donor-advised fund at PJF.
Jen: Fred, most donors give cash or stock when making gifts to nonprofits or opening donor-advised funds; why did you choose to donate a portion of your condo to create a PJF DAF prior to its sale?
Fred: Jen, as you know, I’m familiar with some of the ways one can make charitable gifts and obtain tax deductions. I knew that donating real property is one of those ways, and I knew that the property had to be donated before it was sold to get the maximum tax benefits. We had been wanting to open a DAF with PJF, and once we decided to sell the condo we felt we could open a bigger fund if we used some of the proceeds of the sale for the fund.
The tricky part was that we couldn’t afford to donate the entirety of the condo, and we weren’t sure if any DAF would take a partial interest in real estate. Thanks to your flexibility and cooperation, we were able to donate 50% to NIF and then we partnered to sell it. Now we have these wonderful DAF assets from which to make grants in both the U.S. and in Israel, where we also do grant making.
Jen: How did you feel about the process of selling the condo together with NIF? I can imagine it would feel daunting for some people, and easier to just contribute cash after a sale. Why would you encourage folks to contribute real property?
Fred: Investment real estate often is subject to a significant amount of capital gains taxes, and donating real estate isn’t simple. Here, we felt like the process was seamless. You have a lot of experience in your career with charitable gifts of real estate, so your knowledge, your processes, and your explanations all along the way made the joint listing and sale go very smoothly. We decided to go this route rather than giving cash after the sale because it cut our capital gains tax obligation in half – which increased the size of our fund – and also increased the value of the tax deduction, which dramatically reduced our income taxes in the following two years.
You were our partner in the process and your guidance made it easy! The condo had appreciated a lot since we bought it years ago, and all of those gains would have been subject to tax. By giving 50% to PJF at the start, we saved significant money from the capital gains taxes we would’ve had to pay and received a full fair-market tax deduction for the gift. We avoided most of the capital gains tax liability on the 50% that we retained, and ended up with a sizeable DAF fund as well. Along with the organizations we support, we all ended up “richer” as a result.
Jen: There are so many DAFs out there, from Fidelity to the community foundations, why did you pick NIF’s Progressive Jewish Fund?
Fred: We could never have accomplished this goal with a faceless institution like Fidelity, or without a skilled advisor like you to manage the process. We respect and trust NIF, the values it stands for, and the people we have come to know over the years. We know that many other DAF providers will allow grants to causes that would make us uncomfortable – that don’t align with our worldview about the critical value of democracy, justice, and equality.
When we heard that NIF vets all of the organizations that are eligible to receive funds from the PJF, that gave us confidence. This is our community, so it was wonderful that NIF created PJF a few years ago to make this option possible. We also like promoting NIF every time we make a gift to another organization. In appreciation of these goals, our first DAF grant was to NIF!
Jen: I understand that you also had in mind a legacy aspect of your gift to NIF. Can you tell me a bit about that and what motivated your legacy giving as well?
Fred: We had been talking with Becky Buckwald, NIF’s Chief Planned Giving Officer, about a legacy gift for quite some time. We think investing in NIF’s future is important to help keep its values and impact front and center in Israel, even after we are gone. We know that whatever is left in our DAF after our lifetimes will become part of NIF’s legacy program, so we feel like we have accomplished two really great things at the same time – a DAF for our giving now and a legacy for the future.
Jen: DAF programs have had some negative press in recent years about hording cash and not getting it out the door to charities, but you are a fan; why is that?
Fred: While it’s true that the charitable tax deduction was important to us, and to most, including those who use it to park a lot of cash, what’s more important to us is the charitable impact we can have through our grants. To that end, we are interested in regularly making gifts from our fund to those organizations we care about – and I’m more worried about using it up too quickly. We also care about the philanthropic community we are a part of, and the kindness and professionalism of the staff.
Like most DAF funders, we don’t have millions of dollars just languishing there. I know some folks treat their DAFs more like an endowment so it will last a good long while – different strategies for different objectives. With the help of PJF, whose goals we share, we feel gratified to be able to use our DAF to make an impact during our lifetimes.
Jen: Is there anything you’d want folks to know if they are entertaining either selling a property or contributing other assets to open a donor-advised fund?
Fred: The biggest challenge is managing the sale of the property. We had to wait until the tenant had vacated, as we didn’t want to burden NIF with the duties of a landlord. At the same time, we needed to sell it before I retired, so the tax deduction would have the greatest impact. One also has to figure out whether to donate the entirety of the property, or a portion of it – and to determine how large a percentage makes sense given the complications of the process.
Thank you to Fred and your family for your openness and generosity. If you would like to speak with Jen Spitzer about a donor-advised fund with our Progressive Jewish Fund, contact her at pjf@nif.org. More information about the Progressive Jewish Fund is available here: nif.wmdev.net/pjf.