Private Foundations
Private Foundations

Private foundations and donor-advised funds

Choosing the right vehicles for your charitable goals starts with defining your needs and what’s important to you. Use our quick assessment tool to explore whether a private foundation, donor-advised fund, or combination of both suits you best. You can also:

Explore what may be best for your charitable goals.

Want a more detailed assessment?

Want a more detailed assessment?

Donor-advised funds and private foundations: The benefits of a combined approach.

Maximized taxes

Private foundations and donor-advised funds have different tax rules and regulations.
Watch this video to understand the tax benefits of a combined approach.

% Adjusted gross income (AGI) deductibility

  • Donor-Advised Funds 
  • Private Foundations
  • Cash contributions

    Cash Contributions 60-30
  • Publicly traded securities held longer than one year

    privately held assets 30-20
  • Real property and privately held assets

    privately held assets 30-20

% Adjusted gross income (AGI) deductibility

  • For donor-advised funds, fair market value (FMV) deductibility typically applies to assets held for more than one year, up to the limits listed above.

  • Invest in a Schwab Charitable™ account

    For private foundations, FMV deductibility typically applies to cash and publicly traded securities held for more than one year. For privately held assets, deductibility is limited to the lower of cost basis or FMV, up to the limits listed above.

% Adjusted gross income (AGI) deductibility

  • Ease of administration

    Adding a donor-advised fund requires no account administration on your part. The sponsoring charity handles all recordkeeping and tax filings.

  • Lower costs

    Donor-advised funds have no startup costs and lower operating expenses.

  • Increased flexibility

    When you contribute to a donor-advised fund, you receive a same-year tax deduction and can take your time deciding when and where to give.

  • Anonymous giving

    A donor-advised fund gives you the option to customize each charitable grant and give anonymously.

Donor-advised fund as an alternative to private foundations.

Over time, reasons to dissolve your private foundation and transition the assets to a donor-advised fund may emerge. Future generations want to pursue their own charitable goals. Administrative requirements become burdensome. You seek higher tax deductions on appreciated assets.

Should you convert your foundation to a donor-advised fund?

Here are five questions to consider:

  1. What roles will those involved in the foundation have?
  2. Who will be designated as account holders/users?
  3. Who will be designated as account successors?
  4. Which nonprofits will receive grants through the account?
  5. How will your investment strategy shift from one vehicle to the other?

Compare private foundations and donor-advised funds at a glance.

Tax considerations

The information and content provided herein is general in nature and is for informational purposes only. It is not intended to be, and should not be construed as, a specific recommendation; legal, tax, or investment advice; or a legal opinion. Individuals should contact their own professional tax advisors or other professionals to help answer questions about specific situations or needs prior to taking any action based on this information. Tax laws and authorities are subject to change, either prospectively or retroactively, and any subsequent change could have a material impact on your situation. Where specific advice is necessary or appropriate, Schwab Charitable recommends consultation with a qualified tax advisor or CPA.

A donor's ability to claim itemized deductions is subject to a variety of limitations depending on the donor’s specific tax situation. Consult your tax advisor for more information.

To comply with U.S. Treasury regulations, in particular IRS Circular 230, we also inform you that, unless expressly stated otherwise, the information contained in this communication is not intended to, and cannot, be used to avoid IRS penalties and is provided to support the marketing of our products.