Choosing Between a Private Foundation and a Donor-Advised Fund
Control. The donor has much more control over where the money goes and how it is invested with a private foundation. In contrast, with a donor-advised fund, the donor technically only makes recommendations. Practically speaking, the managing firm usually does not ignore the donor’s recommendations. However, the donor cannot make pledge agreements.
Costs. Private foundations cost more to maintain, and they must give away 5% of their assets each year. Donor-advised funds do not have the same requirement, and they offer larger tax deductions than private foundations.
Privacy. Many documents are available on the internet about private foundations, including I.R.S. filings. This means that everyone can see how much money was donated and where that money went. It is still possible to see how much money went into a donor-advised fund, but information about the distributions is unavailable.
Legacy. Private foundations have unlimited succession for control. Some donor-advised funds limit successions, and once the limit is reached, the fund enters a general pool at the organization.
See Paul Sullivan, Weighing the Best Vehicles for Philanthropic Giving, N.Y. Times, Jan. 28, 2011.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this to my attention.