Professional Advisors
A Word About Private Foundations
Help Your Clients Choose a Giving Approach
Your clients have many options when it comes to executing their philanthropy. They can establish a donor advised fund (DAF) at The Community Foundation for Northeast Florida, they can establish a private foundation, or they can utilize a DAF at The Community Foundation in tandem with their existing private foundation to extend their philanthropic options.
For clients who are considering a private foundation
A Donor Advised Fund (DAF) at The Community Foundation is a compelling alternative to a private foundation that maximizes the joy of philanthropy while eliminating the administrative headaches and earning greater tax advantages. Benefits include:
- No administration—freedom from federal and state filing and reporting requirements
- Hassle-free grantmaking
- No minimum distribution
- Investment flexibility
- Anonymity
For clients with existing private foundations
Establishing a correlating DAF at The Community Foundation can be an attractive option. A DAF opens up access to our staff’s local expertise and may help meet the private foundation’s 5% annual distribution requirement. A fund at The Community Foundation may also help your client support an issue that his or her private foundation doesn’t or can’t address. And, should your client be ready to be relieved of the burdens of a private foundation, we can help them convert their private foundation to a fund or funds at The Community Foundation.
Here are some factors to consider when your clients are choosing a charitable giving approach
| Consideration: | Donor Advised Fund OR Designated Endowment at The Community Foundation | Private Foundation |
|---|---|---|
| Tax Status | Participates in TCF’s public charity status | Applies to IRS for private foundation tax-exempt status |
| Start Up Considerations | Can be created immediately. No cost to establish; annual fee is 1% on the first $2 million (declining scale after that.) Requested 1% contribution to community endowment from each gift. | Can take several weeks or months to establish; significant legal and filing fees, plus possible ongoing office management, insurance, space, staff and miscellaneous expenses. |
| Taxation of Investment Income | None | Up to 2% annually |
| Tax deduction limits for gifts of cash | 50% of Adjusted Gross Income | 30% of Adjusted Gross Income |
| Tax deduction limits for gifts of stock or real property | 30% of Adjusted Gross Income | 20% of Adjusted Gross Income |
| Administration | All record-keeping and accounting performed by TCF | Detailed annual filing with IRS |
| Grantmaking | Donor advisor(s) may make grant recommendations subject to TCF Board approval. TCF staff conducts due diligence and can assist advisors in reviewing and monitoring approvals. | Foundation trustees have complete control of grantmaking distributions. Larger foundations require a professional staff. |
| Required Grant Distribution | None | Must expend 5% of net asset value annually, regardless of how much the net assets earn |
| Investments | TCF is responsible for asset management. Advisors may recommend investment option(s) on balances over $100,000 and may recommend outside advisors on balance over $500,000. | Responsible for asset management. |
| Privacy | Names of individual donors can be kept confidential if desired, and grants can be made anonymously | Must file detailed, public tax returns on grants, investment fees, trustee names, staff salaries, etc. |
| Preservation of Purpose | The Community Foundation protects the establishing donor’s purpose and prevents future generations from changing the fund’s goals or objectives | Next generation board members have full legal control to change goals and objectives of a private foundation |
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