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?
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
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Cash contributions
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Publicly traded securities held longer than one year
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Real property and privately held assets
% Adjusted gross income (AGI) deductibility
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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.
% Adjusted gross income (AGI) deductibility
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Ease of administration
Adding a donor-advised fund requires no account administration on your part. The sponsoring charity handles all recordkeeping and tax filings.
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Lower costs
Donor-advised funds have no startup costs and lower operating expenses.
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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.
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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:
- What roles will those involved in the foundation have?
- Who will be designated as account holders/users?
- Who will be designated as account successors?
- Which nonprofits will receive grants through the account?
- How will your investment strategy shift from one vehicle to the other?
Compare private foundations and donor-advised funds at a glance.
- Costs
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Also, download our Private Foundations and Donor-Advised Funds brochure.
Costs Costs Private Foundation Donor-Advised Fund Asset minimums Generally recommended for those with millions in charitable assets $0 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
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Benefits 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
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Tax considerations Tax considerations Private Foundation Donor-Advised Fund Tax deduction limits for cash contributions 30% of AGI 60% 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