Family philanthropic efforts can take many forms. Two of the most common philanthropy vehicles used among the affluent are the private foundation (PF) and the donor-advised fund (DAF).
A private foundation is an IRC Section 501(c)(3) organization that has one primary source of funds, typically either from an individual/ family but may also be a business. This discussion focuses on private non-operating foundations, otherwise known as grant-making foundations.
A donor-advised fund (DAF) is a separately identified fund or account that is maintained and operated by an IRC Section 501(c)(3) organization (public charity). Once the donor contributes to the DAF, the managing organization legally controls the funds going forward. The donor only maintains advisory privileges with respect to amount and recipient of distributed funds.
There are several items to consider when determining which of these charitable vehicles is best suited for addressing the donor’s situation and philanthropic goals.