Donor Advised Funds (DAFs) are often explored as viable alternatives to private foundations and are popular options for donors nationwide. DAFs provide donors an immediate tax break, investment growth opportunities of charitable assets and are sustainable through retirement. There are three main benefits of Donor Advised Funds.
- Reasonable start-up costs.
- Excellent opportunity for the donor to research charitable organizations and find a match for their philanthropic interests.
- Ability for moderate income donors to involve family in charitable giving.
For donors with more substantial charitable intentions, a DAF may also be considered as an alternative to a private foundation. These are the main advantages of a DAF over a private foundation:
- Higher Grant Distribution Rates: DAFs often make grants of 15 percent to 30 percent each year. The Council on Foundations website indicates that private foundations grant an average of 6.23 percent of assets to charity on an annual basis.
- Access for Donors: Many individuals can create a DAF with $10,000 or more. Private foundations are much more expensive to fund and operate. The development or creation of a private foundation could involve an expenditure of $10,000 simply to create the organization. In addition, the private foundation has substantial operating costs each year.
- Staff Oversight and Donor Support: About 5 percent of private foundations have professional staff. The Community Foundation highly qualified staff with great expertise in making effective charitable grants. Giving grants with optimum charitable impact requires a level of expertise that is more likely to be found with the public charity staff managing a DAF.
Source: The Council on Foundations