Private Foundation Comparison

How Does a Private Foundation Compare to a Donor Advised Fund?

There are more than several good reasons to establish a fund at a Community Foundation versus setting up a private foundation. Here is a useful comparison chart to help answer some basic questions. We look forward to speaking with you in more detail about the options available at the Community Foundation.

Donor Advised Fund Private Foundation
Description For donors who wish to actively engage in their philanthropy through an administrative and programmatic partner. Shares public charity tax-exempt status of the Foundation; Not a separate corporate entity. For donors who want extensive control over grantmaking, investments, and board selection. Must apply for private foundation tax exempt status from IRS. Separate corporate entity status
Donor Control Donor makes grant recommendations to the Foundation for approval. After initial gift, assets are property of the Foundation. Donor retains complete control over investments, grantmaking and board selections, subject to IRS requirements.
Philanthropic Advising, Grantmaking & Community Knowledge Services provided by the Foundation include access to grantmaking expertise, strategic charitable planning, family philanthropy facilitation, site visits, and planned giving vehicles. Must arrange and support own grantmaking, administrative, and monitoring structure.
Annual Costs 2% annually, with tiered fees for assets over $3MM. Minimum initial gift of $25,000. Must contract/hire and oversee legal, accounting, and program-related staff and expenses.
Minimum Annual Payout Requirements None. Required pay out for charitable purposes minimum of 5% of asset value.
Investment Flexibility Public charity deductibility. Property: Fair market value up to 30% AGI; Publicly-traded stock: fair market value to 30% AGI; Cash: 50% of AGI Private foundation deductibility. Property: cost basis up to 20% AGI; Publicly-traded stock: fair market value to 20% AGI; Cash: 30% of AGI
Administration (personnel, facility, gift and grant management) Services provided by the Foundation. Online fund management available. No separate tax return required. Must hire personnel and establish board. Manage facility, accounting, record keeping, grant and gift processing, and file tax returns.
Annual Taxes & Filings Not required (reported as part of the Foundation’s annual reporting); exempt from excise taxes. Must be filed by private foundation with required supporting schedules (Form 990PF); excise taxes are 1-2% of net investment income. State reports.
Self-Dealing Rules Private foundation self-dealing rules do not apply. Regulations prohibit most transactions between a private foundation and its donors (including related persons or corporations).
Fiduciary Responsibility The Vermont Community Foundation fulfills associated fiduciary responsibilities. Private foundation board has full fiduciary responsibility, must develop own compliance policies.
Liability & Risk Insurance (including D&O) Provided by the Vermont Community Foundation. Purchased by the private foundation.