Donor-Advised Giving Fund vs. Private Foundation:
What’s Right for You?
At New Horizons of SWFL we want to empower you to steward your resources in the most effective and joy-filled way. As generous people, many of us want not just to give, but to build a legacy of generosity. Two of the most common vehicles for strategic giving are Private Foundations and Giving Funds (also known as Donor-Advised Funds, or DAFs). While both can support your long-term philanthropic goals, they serve different needs, and understanding the differences can help you choose wisely.
Below, we walk through key considerations and where each option may make sense, especially for those of us who desire to honor God with our giving.
- What Is a Giving Fund (Donor-Advised Fund)?
A Giving Fund is an account you open with a sponsoring organization (such as the National Christian Foundation (NCF), Collier Community Foundation (CCF), The Collaboratory, etc.), rather than creating a separate legal entity. When you contribute to that fund:
- You receive an immediate tax-deductible gift.
- You can donate not just cash, but also appreciated securities, real estate, or other complex assets.
- The fund’s balance can be invested over time, allowing that pool of resources to grow tax-free.
- When you’re ready, you can recommend grants to qualified charities — including international ones with U.S. affiliates — and NCF handles the administration for you.
- You can see your fund, recommend grants, and manage giving online — easily, anytime.
Because your fund is held within the sponsoring organization, not as an independent legal entity, there’s far less administrative burden. You don’t have to file complex tax returns, maintain a board, or worry about the overhead of a foundation.
- What Is a Private Foundation?
A private foundation is a separate, stand-alone charitable entity. Typically:
- It’s governed by a board of trustees (often family members), giving you full control over how grants are made, how assets are invested, and how the foundation is run.
- It must comply with IRS rules, including distributing a minimum percentage of its assets each year (usually around 5% of net investment assets).
- It also has legal, accounting, and regulatory obligations: you need to file annual tax returns, maintain bylaws, record meetings, and more.
- Information about grants and board members may be publicly available, reducing anonymity.
- There may be an excise tax (for example, about 1.39% on net investment income) that needs to be paid annually.
- Key Differences: Side-by-Side Comparison
Here’s a side-by-side look at some of the most important areas where Giving Funds (DAFs) and Private Foundations differ:
Feature | Giving Fund (DAF) | Private Foundation |
|---|---|---|
Setup & Administration | Easier, hosted by a sponsoring org (e.g., NCF) | More burdensome – legal entity, filings, board, governance |
Tax Deduction Limits | More generous: e.g., up to 60% of AGI for cash, and up to 30% for long-term securities. | More restrictive: e.g., up to 30% of AGI for cash and 20% for some non-cash assets. |
Ongoing Compliance | Minimal: no separate tax return at the DAF account level. | Annual filings, governance, grant oversight, reporting. |
Granting Flexibility | Recommend grants to public charities; the sponsor approves | Full control over grantmaking — including possibility to grant to individuals in certain cases. |
Privacy | High: donor identities and grant recommendations can remain private. | Lower: some information is public; board members and grants may show on public filings. |
Cost / Tax on Investment Income | No excise tax on income within the DAF. | Excise tax required. |
Legacy / Perpetuity | Can continue across a generation or two, but typically not beyond. | Can be structured to last indefinitely as a family legacy. |
4. Why So Many Are Choosing to Move from Private Foundations to a Giving Fund
- Greater tax efficiency — Giving Funds often allow higher deduction limits and more favorable treatment of non-cash assets.
- Less administrative burden — Rather than managing a foundation’s legal structure, board, and filings, donors can hand off the heavy lifting to NCF while maintaining advisory privileges.
- Increased flexibility — You can recommend grants whenever you like, manage your fund online, and invite family in without the formalities of a foundation.
- Privacy — If you value discretion in your giving, a Giving Fund offers greater anonymity than a private foundation.
NCF outlines a five-step process to transfer (or “terminate”) your private foundation and move its assets into a Giving Fund — simplifying your philanthropy while potentially increasing your impact.
- When a Private Foundation Still Makes Sense
There are still situations where a private foundation may be the right tool:
- You want full control over investments, grant structure, and perhaps even hire family members.
- You wish to operate your own charitable programs, rather than just giving grants.
- You see your foundation as a multi-generational legacy vehicle that will outlive you and continue giving in your family’s name.
- Transparency is not a concern and you are comfortable with the public nature of foundation filings.
- How to Decide What’s Best for You
Here are a few guiding questions to help you and your advisors as you weigh Giving Funds vs. Private Foundations:
- What are your giving goals? Are you primarily grantmaking, or do you want to run programs?
- How much control do you need — and how public do you want that control to be?
- What is your giving horizon? Are you building a legacy for generations, or making flexible, long-term giving decisions?
- How much administrative burden are you willing (or able) to manage?
- What kinds of assets do you want to give? (Cash, stock, real estate, business interest?)
- What are your tax planning goals? How might different vehicles affect your deductions and long-term tax strategy?
Conclusion / Invitation
Choosing between a Giving Fund and a Private Foundation isn’t simply a financial decision. It is a deeply personal, faith-informed choice. At New Horizons of SWFL, we are here to walk beside you as you discern the right vehicle for your generosity.
If you have any questions or need referrals to sponsoring organizations, We would be honored to help you steward your gifts with wisdom, joy, and eternal purpose. Contact New Horizons at 239-946-4146.
References:
Avidian Wealth Solutions — Donor-Advised Fund vs Private Foundation → https://avidianwealth.com/financial-insights/articles/daf-vs-private-foundation/ Avidian Wealth
J.P. Morgan — Donor-Advised Funds vs. Private Foundations: How to Choose → https://www.jpmorgan.com/insights/wealth-planning/family-wealth-planning/donor-advised-funds-vs-private JPMorgan Chase
Keystone Global Partners — DAF vs. Private Foundation: Which Is Better? → https://keystonegp.com/insights/donor-advised-fund-vs-private-foundation/ Keystone Global Partners
Kiplinger — Charitable Trade-offs Between Donor-Advised Funds and Private Foundations → https://www.kiplinger.com/personal-finance/charity/604435/charitable-trade-offs-between-donor-advised-funds-and-private Kiplinger
National Christian Foundation (NCF) — Moving your private foundation into a Giving Fund → https://national.ncfgiving.com/forms/movingprivatefoundation National Christian Foundation
Rockefeller Capital Management — Roadmap to Effective Philanthropy: DAFs vs. Private Foundations → https://www.rockco.com/strategic-insights/roadmap-to-effective-philanthropy-donor-advised-funds-vs-private-foundations/ RockCo
Vanguard Charitable — Comparing private foundations and donor-advised funds → https://www.vanguardcharitable.org/sites/default/files/2024-11/hti_dafs_vs_private_foundations.pdf Vanguard Charitable
DAFgiving360 — Donor-Advised Fund Account vs. Private Foundation → https://www.dafgiving360.org/maximize-your-impact/align-your-giving-vehicles/donor-advised-vs-private-foundation dafgiving360.org