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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.

Donor-advised fund, private foundation, or both? Let’s find out.

Check the things that are most important to you:

A combined approach may be right for you.

Private foundations and donor-advised funds have different tax rules and regulations. Using them together can help you maximize your taxes.

A donor-advised fund may be right for you.

A donor-advised fund may provide the improved tax deductions, increased grant flexibility, anonymity, and lower costs you’re looking for.

A private foundation may be right for you.

A private foundation will give you more control over distributions and investments and may be the powerful giving vehicle you need.

Want a more detailed assessment?

Access our 10-question survey or contact us at 800-746-6216 to discuss your needs.

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. Using them together can help you maximize tax benefits.

% Adjusted gross income (AGI)
deductibility

  • Donor-Advised Funds
  • Private Foundations
    • 50%
    • 30%

    Cash contributions

    • 30%
    • 20%

    Publicly traded securities held
    longer than one year

    • 30%
    • 20%

    Real property and
    privately held assets

  • 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.

  • 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.

  • 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?

Need more information about dissolution in your state?

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

Also, download our Private Foundations and Donor-Advised Funds brochure.

Costs Private Foundation Donor-Advised Fund
Asset minimums Generally recommended for those with millions in charitable assets $5,000
Startup costs May be substantial—legal documentation, tax filings, etc. None
Ongoing annual expenses Can be substantial Comparatively low
Annual distribution requirements 5% distribution required annually At donor’s discretion
Benefits Private Foundation Donor-Advised Fund
Administration Requires recordkeeping, asset management, review of grant solicitations, tax filings All managed by Schwab Charitable
Privacy Public disclosure of contributions and grants in annual tax filings Individual account activity can be private
Professional asset management options Yes Yes
Tax considerations Private Foundation Donor-Advised Fund
Tax deduction limits for cash contributions 30% of AGI 50% of AGI
Tax deduction limits for securities contributions 20% of AGI 30% of AGI
Tax deduction limits for real estate and other assets 20% of AGI, deductible at the lesser of FMV or cost basis 30% of AGI, deductible at FMV
Reporting Required annual state and federal tax returns None at the account level
Taxes Excise taxes, up to 2% of annual investment income None

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