Menu

Advised Funds vs Private Foundations

Fort Wayne fountains at night

While some donors may find a private foundation suited to their needs, the alternative of establishing a fund with The Community Foundation often proves more attractive.

Many individuals have converted their private foundation to donor advised funds. See the comparison information below (or see a PDF of the comparison chart) to understand why.  

Start-Up Time and Creation

Donor Advised Fund at Community Foundation
– Funds can be established immediately with a simple three page advised fund agreement

Private Foundation
– Start-up time can be several weeks or months for a donor to create a private foundation

Start-Up Cost

Donor Advised Fund at Community Foundation
– None

Private Foundation
– Legal, accounting, and filing fees are typically substantial and are paid by the donor

Tax-Exempt Status and Deduction Limits

Donor Advised Fund at Community Foundation
– Public charity
– Tax deduction for cash gifts: up to 50% of adjusted gross income
– Tax deduction for appreciated property: up to 30% of adjusted gross income

Private Foundation
– Private Foundation
– Tax deduction for cash gifts: up to 30% of adjusted gross income
– Tax deduction for appreciated property: up to 20% of adjusted gross income

Valuation of Gifts

Donor Advised Fund at Community Foundation
– All gifts valued at fair market value
– Gifts from private foundations are permitted

Private Foundation
– Fair market value for publicly-traded stock, cost basis for all other gifts
– Gifts from private foundations not permitted

Donor Control

Donor Advised Fund at Community Foundation
– Donor holds advisory power over grant recommendations; final approval needed by Community Foundation board.

Private Foundation
– Donor retains complete control, subject to IRS requirements

Annual Costs

Donor Advised Fund at Community Foundation
Endowed fund: 0.1%-0.4% of assets with $200 annual minimum
Non-Endowed fund: 2% of total quarterly grant payments with $200 annual minimum

Private Foundation
– All costs paid by donor

Investments

Donor Advised Fund at Community Foundation
– Invested by Community Foundation
– With funds over $500,000 the donor may retain their own investment manager with approval by the Investment Committee

Private Foundation
– Donor determines investments

 

Taxes

Donor Advised Fund at Community Foundation
– None

Private Foundation
– All taxes must be filed and paid for by donor
– Excise tax up to 2% of investment income, including capital gains

Required Grant Distribution

Donor Advised Fund at Community Foundation
– None

Private Foundation
– Must expend 5% of net asset value annually, regardless of how much the assets earn

Grantmaking Expertise and Research

Donor Advised Fund at Community Foundation
– Access to Community Foundation staff

Private Foundation
– Performed by donor

Privacy

Donor Advised Fund at Community Foundation
– Names of donors can be kept confidential if desired, and grants can be made anonymously.

Private Foundation
– Must file detailed and public tax returns on grants, investment fees, trustee names, staff salaries, etc.
– Excise tax up to 2% of investment income, including capital gains

Administrative Responsbilities

Donor Advised Fund at Community Foundation
– Recommend grants to favorite charitable causes

Private Foundation
– Manage assets, keep records, select charities, administer grants, file state and federal tax returns, maintain board minutes, etc.

Fiduciary Protection

Donor Advised Fund at Community Foundation
– Provided by Community Foundation

Private Foundation
– Must be purchased by private foundation

Related articles

Planned Giving Options

There are many ways to structure charitable gifts. Some are easy and others are more complex. We have many flexible options to meet your needs.

Advantages of a Community Foundation

Your one-stop-shop for access to local nonprofits, we add insight, connections, and access to the charitable issues and organizations people care about.

Suggested Language and Clauses for Bequests

For donors interested in making a bequest to the Community Foundation, here are recommended clauses that may be used to make a gift through a will or living trust.

© 2019 Community Foundation of Greater Fort Wayne