News for Professional Advisors

Case Study: Transitioning a Private Foundation

As donors’ needs change over time, the complexities of a standalone foundation don’t always continue to make sense. In these situations, a donor advised fund can offer a simpler experience and advantages over a private foundation.

With the right experience and planning, transferring a private foundation to a donor advised fund at the Community Foundation can be an easy experience. When you spot these opportunities for your clients to simplify their giving experience, it may be time to have a conversation about their options.

Here are some scenarios to keep in mind:

The next generation is less involved. Maybe mom and dad set up the private foundation when they retired and had plenty of time to devote to it. Now that the kids are running the foundation, they simply don’t have the time to dedicate. A donor advised fund involves almost no administrative work — your clients can simply advise grants when the time is right, and we take care of the rest.

A big influx of assets. If a business recently sold or someone passed away, the private foundation may see a large influx of additional assets. Suddenly, more grants have to go out the door to meet minimum distribution requirements. A donor advised fund isn’t subject to minimum distributions, so your clients can take a more strategic approach to grantmaking.

Smaller foundations may have burdensome costs. Private foundations under $10 million may find that the ever-increasing operating costs and legal work eat into their grant-making potential. Donor advised funds at the Community Foundation have a simple, predictable fee structure, allowing for a more stable strategy.

When you come across these scenarios, you have an opportunity to add value by guiding families through their options, including dissolving a private foundation into a donor advised fund.

If you have clients interested in transitioning their private foundations, we are here to help.

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