Exploring Donor Advised Funds vs Private Foundations

Brian Landzaat |

Donor Advised Funds (DAFs) and private foundations are the two most used giving accounts. In both cases, the transfer of assets to the philanthropic vehicle are irrevocable and considered by the IRS as a charitable gift, therefore the donor takes an immediate tax deduction that same year.



Donor-Advised Fund (DAF)

Private Foundation

Initial Setup and Costs

Relatively simple and low-cost

Complex and expensive; legal, accounting fees


Typically for use over 1-2 generations

Optimally, set up to function for generations to come


Donor advises on grants, but sponsoring organization has final say

Donor has full control over grants and investments

Tax Benefits (Cash Contributions)

Higher tax deductions (60% of AGI)

Lower tax deductions (30% of AGI)

Tax Benefits (Securities/Property)

Higher tax deductions (30% of AGI)

Lower tax deductions (20% of AGI)

Tax Deductibility (Real Estate, Closely Held Business, Appreciated Stock)

Fair market value deduction (up to 30% of AGI for appreciated stock)

Cost basis deduction, with more restrictions and lower limits

Administrative Responsibilities

Minimal; managed by sponsoring organization

High; requires staffing, record-keeping, legal compliance


Grants can be made anonymously

Must file public tax returns (990-PF) with grants, officers, etc.

Minimum Contributions/Assets

None or low minimums

Generally, substantial assets needed for effective operation

Annual Distribution Requirement


Required to pay out at least 5% of assets annually

Startup Time

Can be set up in days

Can take months to establish

Investment Options

Limited to choices provided by sponsoring organization

Broad; can include direct investments, real estate, etc.

Ongoing Costs

Low; typically a percentage of assets under management

High; administrative, legal, management fees

Grantmaking Flexibility

Limited to IRS-approved public charities

Can make grants to a wide range of entities, including individuals and for-profit companies for charitable


The information provided here is not intended as tax or legal advice and should not be taken as such; consult a qualified attorney or certified public accountant for professional guidance.