A donor advised fund is a charitable giving vehicle administered by a public charity that allows donor to make a charitable contribution, receive an immediate tax deduction and make grants to qualified charitable organizations at their convenience.
- The minimum contribution for a donor advised fund can be quite low; at Laguna Beach Community Foundation it is $5,000, significantly less than a private foundation.
- The administrative and legal requirements of a donor advised fund are managed by the administering public charity. With LBCF, a fund can be opened in 24-48 hours and requires very little of the donor with regard to maintenance.
- Helps to streamline the giving process by eliminating the need to keep track of multiple gift receipts. Grants may be issued to a qualified charitable organization in a matter of minutes.
- Potential to grow your charitable contribution tax-free through the investment of your funds.
- If you prefer, you can make gifts anonymously.
- Click here for the tax benefits of a donor advised fund.
Things to Keep in Mind:
- The administering public charity has ultimate control over the assets contributed. You recommend where the grants get distributed and the administering public charity is responsible for confirming qualified charitable status and that the funds are to be used for charitable purposes only.
- Grants cannot be made to satisfy preexisting bound pledges.
Family (Private) Foundation
A private foundation is a nonprofit entity, which is usually created via a single primary irrevocable donation from an individual or a business and whose funds and programs are managed by its own trustees or directors. The board is responsible for receiving charitable contributions, managing and responsibly investing those charitable assets and making grants to qualified charitable organizations.
- Facilitate and organize charitable giving while allowing you to build a legacy that can last beyond your lifetime through the assistance of family members or other appointed trustees and employees.
- Potential to grow charitable contributions through successful investment management of the foundation.
- Leniency in grant making as you are able to support charitable programs of individuals and other entities subject to strict IRS requirements.
Things to Keep in Mind:
- Considering the administrative requirements and potential legal and accounting fees, a substantial minimum contribution is generally required. Many investment advisors recommend a fund opening contribution of at least $25 million to justify the expenses and time required to open a private foundation.
- You are unable to give anonymously.
- Annual filing requirements must be kept up to date with the IRS.
- A 5% distribution is required annually.
- Investment income is subject to 1% to 2% excise tax.
- Click here for a comparison of the tax implications compared to a donor advised fund.
Private foundations are typically utilized by individuals and families that are looking to fully immerse themselves in the philanthropic process. This includes running an organization, ensuring proper financial oversight, and actively taking part in an annual grant-making process. Administrative burdens such as tax filing and record-keeping fall on the private foundation. A donor advised fund still allows for individuals to build a strategic philanthropic giving plan, but puts administrative tasks into the hands of the administering public charity. This is a good option for people looking to organize their charitable giving without the administrative burden of a private foundation. If you're interested in opening a low cost, professional donor advised fund, click here for more about how you can partner with Laguna Beach Community Foundation.