Giving vehicles provide a more organized and formal platform from which to conduct impact philanthropy, and also provides important tax-planning benefits. This comparison will help you assess your current and prospective needs, and enable you to determine which charitable vehicle might be the best fit for you.
Donor Advised Fund
Considerations for creating and administrating a DAF.
- Formation: Fund account is opened through a DAF provider.
- Tax-Exempt Status: Shares the public charity status of the DAF provider.
- Charitable Deductions—Cash Gifts: Tax deduction available up to 60% of adjusted gross income in any one year.
- Charitable Deductions—Appreciated Property: Tax deduction available up to 30% of adjusted gross income in any one year. Deduction available for full fair market value.
- Distribution Requirement: No annual distribution requirement from fund.
- Investments: Fund assets are invested and managed through the DAF provider.
- Governance & Succession: Donor may name a trusted advisor to recommend grants and successors to fund account.
- Anonymity: Contributions, grants, and donors may remain anonymous, if desired.
- Control of Grants: Donor initiates grant recommendation; IRS requires the final approval and responsibility to fall with the DAF provider team.
- Fiduciary Duty: The DAF provider fulfills the fiduciary responsibility.
Private Foundation
Considerations for creating and administrating a private foundation.
- Formation: Foundation requires legal filings, governance, role establishment, and administration.
- Tax-Exempt Status: Must apply for tax-exempt status as a private foundation through the IRS.
- Charitable Deductions—Cash Gifts: Tax deduction is limited to 30% of adjusted gross income in any one year.
- Charitable Deductions—Appreciated Property: Tax deduction available up to 20% of adjusted gross income in any one year. Deduction available for full fair market value only if publicly traded stock. Other appreciated assets receive deductions limited to cost basis.
- Distribution Requirement: Annually must distribute at least 5% of asset value for charitable purposes, regardless of income.
- Investments: Assets are managed independently, determined by the Foundation leadership.
- Governance & Succession: Opportunities for board member roles and active participation of family members.
- Anonymity: Contributions, grants, and board members are listed on annual tax documents, which are available for public review.
- Control of Grants: Donor retains complete control over investments and grantmaking are subject to IRS requirements.
- Fiduciary Duty: The Foundation board has full fiduciary responsibility.
The tax and foundation planning information offered is general in nature. It is provided for informational purposes only and should not be construed as tax or legal advice. You are encouraged to consult an attorney or tax professional regarding your specific tax and legal situation.