Comparing Donor-Advised Funds to Private Foundations

Donor-Advised Funds (DAFs) and private foundations are two common ways for individuals and families to give back to charitable causes. However, there are some key differences between the two that may make one a better choice over the other, depending on the individual's goals and circumstances. In this article, we’ll look at a donor-advised fund comparison to private foundations.

One key difference between DAFs and private foundations is the level of control the donor has over their contributions. With a DAF, the donor makes a contribution to the fund and then recommends how the funds should be distributed to charitable organizations. However, the ultimate decision on how the funds are distributed is made by the organization that manages the DAF. 

On the other hand, private foundations are typically established by the donor and are controlled by the donor or their designated representatives. This means that the donor has more control over how their funds are used and distributed with a private foundation.

Another key difference is the level of administrative and compliance requirements. Private foundations are subject to more extensive regulations and compliance requirements, including annual tax filings and reports, as well as ongoing operational and management responsibilities. DAFs are generally simpler and less administratively burdensome, making them more accessible to a wider range of donors.

DAFs also offer more flexibility in terms of funding. DAFs can accept a variety of assets, such as cash, publicly traded securities, real estate or private shares, whereas private foundations typically accept cash or publicly traded securities but are subject to non-qualifying investment rules. Additionally, DAFs can be funded with a one-time contribution or through a series of contributions over time, whereas private foundations are typically funded through a larger initial contribution. 

Finally, DAFs can offer tax benefits that private foundations cannot. Public foundations that manage DAFs are typically considered tax-exempt public charities, which means donors can receive tax benefits for their contributions. With a private foundation, donations provide tax benefits as well, however rules on holdings and activities are more stringent. Foundations must typically meet certain distribution requirements in order to retain their tax-exempt status.

In summary, both DAFs and private foundations offer a way for individuals and families to give back to charitable causes. However, depending on the individual's goals and circumstances, one option may be more suitable than the other. DAFs offer more simplicity, flexibility, and immediate tax benefits, while private foundations offer more control and long-term tax benefits.

Charitable giving is an opportunity to bless others as Christ blessed us. It’s also an important part of a sound financial plan. The Canadian National Christian Foundation provides philanthropic advice and wants to connect God’s money with God’s work. 

Our staff, our leadership, and our board are all believers who want to help you manage your assets and guide you through creative giving solutions that also benefit you. We can handle non-cash gifts efficiently, getting the money into the field as soon as possible with 100% of your principal always available for your charitable grant recommendations. You can get started by opening a donor-advised fund today!

About Canadian National Christian Foundation

CNCF is a community of givers who are seeking to advance the Kingdom of God by connecting the resources God has entrusted to them with His work on earth.

Similar to other public foundations, CNCF’s difference is the commitment of its staff and directors to the Word of God, its non-denominational history and status as a Christian foundation, and its ability to allow donors to donate anonymously, at a time and gift value of their choosing.  Learn more by visiting our website.