Private Foundations & DAFs

Choosing the Right Philanthropic Vehicle

Looking for a longer-term, more strategic vision for your philanthropy? A private family foundation might come to mind. But while private foundations may seem like an attractive option for some, you might be shocked to realize some of the disadvantages.

While the name 'private foundation' implies anonymity, a private foundation actually provides the opposite. In fact, it cannot withhold its identity when making a grant, whereas a donor advised fund has much more flexibility.

Plus, there are important tax implications for private foundations which differ from the tax advantages of a donor advised fund at the Community Foundation.

We put together a chart to help distinguish the similarities and differences between a donor advised fund held at the Community Foundation and a private foundation. Often times, you'll find a donor advised fund is a more flexible option with the same benefits as a private foundation. Plus, you'll have the advantage of the Foundation's expertise on your side.

Private Foundations and Donor-Advised Funds at a Glance

Private Foundation

Donor Advised Fund

Administrative Fees

Typically high, but can be modestFees starting at 1% and decreasing for
balances over $1 million

Set-up Process

Legal work required, can be time consumingCan be done in less than a day with no set-up fee

Tax Deduction for Contributions

Cash: 30% of AGI
Securities: 20% of AGI
Privately Owned Assets: Cost Basis
Cash: 60% of AGI
Securities: 30% of AGI
Privately Owned Assets: Fair Market Value

Excise Taxes

Up to 2% of annual investment incomeNone

Annual Distributions (Grantmaking)

Required 5% distributionFlexible, with no minimum requirement

Anonymity

NoYes, donors can choose full/partial anonymity if desired

Lead beneficiary of CLAT

NoYes

Perpetuity

Yes, if desiredYes, if desired

Ongoing Administration

Responsible for administration and IRS filingsCommunity Foundation handles all administration and IRS filings

Please note, exceptions to the rules always apply, and each situation is unique and should be evaluated based on circumstance.