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Donor Advised Fund or Private Foundation?

Posted on November 6, 2015 by Mark Neithercut

I read an interesting article in Monday’s WSJ (11/2/2015, p. R4) about donor advised funds – interesting in the sense that the author doesn’t mention community foundations as a provider of this charitable giving tool, even though it was invented and proven successful by the community foundation field. Furthermore, the author doesn’t even mention private foundations as an option.

When we make presentations to professional advisors, a question we hear regularly is: When deciding between a donor advised fund or a private foundation, at what size does a private foundation make more sense?

My answer has always been that it depends on the goals of the donor, not necessarily asset size. For example, it can depend on your interest in personal involvement – it’s a lot easier to get personally involved with a grantee and lend additional resources beyond a grant with a private foundation. On the other hand, DAFs are a very efficient charitable giving tool that any donor should consider. Most of our clients have both.

When thinking about donor advised funds, don’t forget about your local community foundation and give some thought to your goals before deciding between DAFs and a private foundation. Indeed, you may find that both are useful tools in your charitable giving arsenal.

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