When contemplating the conversion of a private foundation into a donor advised fund, it is essential to consider what aspects you are able to keep, what additional benefits you will gain, and what administrative burdens and limitations you will be free from moving forward.
Click here to download additional information on the benefits of private foundation conversion.
Interested in learning more? Contact Kelly Huber, Vice President for Philanthropy, at firstname.lastname@example.org or 520-209-2858.
What You Keep
A donor advised fund lets your family or the original founding donor retain their identity and stature in the community.
- CHARITABLE INTENT
The same mission and focus of a private foundation can be incorporated into the guidelines and objectives of your donor advised fund.
As fund advisor(s), you will continue to recommend grants to support the causes and organizations you care about. CFSA then takes responsibility for vetting potential grantees and ensure grants comply with all IRS guidelines and requirements.
- FAMILY LEGACY
A fund established at CFSA allows families to teach their children and subsequent generations the importance and wisdom of philanthropy that can positively impact our community. Fund advisors can also name successor fund advisors for the next generation.
What You Gain
- FAVORED TAX STATUS
As a public charity, the fund will retain favorable tax status compared to a private foundation. Cash gifts to the fund are deductible up to 60% of adjusted gross income vs. 30% for a private foundation. Gifts of appreciated property are deductible up to 30% of adjusted gross income vs. 20% for a private foundation.
- PROFESSIONAL INVESTMENT MANAGEMENT
Fundholders gain professional investment management of their assets. CFSA’s investment consultants support asset allocation and manager selection. Oversight is provided by the CFSA’s Investment Committee, comprised of experienced investors and investment professionals. Additionally, due to CFSA’s economy of scale, investment fees are lower than similarly structured private portfolios.
- SELECTIVE ANONYMITY
While most individuals and families are comfortable with recognition for their generosity, some may desire anonymity. Fund advisors can either choose to be recognized or make grants anonymously.
- GRANTMAKING SUPPORT
CFSA’s professional grantmaking staff has deep knowledge of the high-impact organizations that comprise our region’s vibrant nonprofit community. Our staff is here to support you and your family with research and guidance whenever it is desired.
- NO PERCENTAGE DISTRIBUTION REQUIREMENTS
IRS regulations require private foundations to distribute at least 5% of the foundation’s assets each year. While we do expect that grants will be made annually from your fund, there is no annual percentage requirement for donor advised funds.
- NO EXCISE TAX ON INVESTMENT INCOME
Private foundations are required to pay a 1-2% excise tax on investment income. Donor advised funds are not subject to this tax.
- NO TAX RETURNS AND AUDITS
Private foundations are required to file annual Form 990-PF tax returns and, depending upon the size of the private foundation, may need annual audits and incur legal expenses. These administrative costs and functions are not required of funds held at CFSA.
- REDUCED ADMINISTRATIVE EXPENSES
Legal, accounting, and operational expenses can be substantial for Private Foundations. The administrative fee for our donor advised funds is just 1.25% for funds up to $1 million and then steps down as the dollar value of the Fund increases.