Differences Between Donor-Advised Funds & Private Foundations

Donor-Advised Funds Private Foundations
Start-up time: Immediate Can take several weeks or months.
Start-up costs: None Legal (and other) fees are typically substantial.
Ongoing administrative and management fees Endowed: Greater of $200 or 1%;Non-endowed: Greater of  $250 or 1.5%, plus investment management fees Can be in the range of 250-400 basis points (2.5% to 4% per year).
Tax deduction limits for gifts of cash 50% of adjusted gross income 30% adjusted gross income
Tax deduction limits for gifts of stock or real property 30% of adjusted gross income 20% adjusted gross income
Valuation of gifts Fair market value Fair market value for publicly traded stock, cost basis for all other gifts, including gifts of closely-held stock or real property.
Required grant distribution None Must expend 5% of net asset value annually, regardless of how much the assets earn.
Excise taxes None 1%-2% of net investment income annually.
Privacy Names of individual donors can be kept confidential if desired, and grants can be made anonymously. Must file detailed public tax returns on grants, investment fees, trustee names, staff salaries, etc.
Administrative responsibilities Recommend grants to favorite charitable causes. Manage assets, keep records, select charities, administer grants, file state and federal tax returns, maintain board minutes, etc.