Private Foundation or Donor-Advised Fund?
Which is better for your client?
If your client has a private foundation or is thinking of starting one, we hope you will include the alternative of a donor-advised fund in the discussion. There would be no costs to anyone other than the fees you charge your client, and the fund could be established in hours with a minimum donation of $25,000. The individual or family will receive notice of their tax advantage immediately; they could be recommending grants almost as quickly.
We know the decision is more complex than that. Your client has expectations, the dollar amount is a factor, and so is the degree of control and autonomy. There also are the four types of donor-advised funds we offer to consider.
We offer the comparison below as part of your deliberations.
| Donor Advised Fund | Private Foundation | |
|---|---|---|
| Donor Involvement | Donor recommends grants to nonprofits that are then approved by the Hampton Roads Community Foundation board with grants paid in your name by the community foundation. | Donor appoints board, which controls investments and grantmaking. |
| Tax Status | Public charity | Private charity |
| Minimum Contribution | $25,000 | $2 million traditionally recommended |
| Grantmaking and Administrative Support | Professional staff is available at no charge to help identify and assess grantees, help you learn about community needs, verify nonprofit status of groups and handle investment, paperwork, filings and administration. Grants can be made anonymously if you wish. | Foundations must arrange and support their own grantmaking, monitoring, investment and administration. |
| Start-up Costs | None | Legal, accounting, and filing fees and expenses. |
| Ongoing costs | Annual fee assessed to assets | All legal, accounting, and filing fees and expenses. |
Income Tax Deductions for Gift
| Donor Advised Fund | Private Foundation | |
|---|---|---|
| Cash | Up to 60% of adjusted gross income. | Up to 30% of adjusted gross income. |
| Appreciated Stock | Fair market value up to 30% of adjusted gross income. | Fair market value up to 20% of adjusted gross income. |
| Real estate and closely held stock | Fair market value up to 30% of adjusted gross income. | Cost basis up to 20% of adjusted gross income. |
Download a flier about our donor-advised funds.
