Donor advised and private foundations

My new philanthropic goal in life is to support non-profits that make Star Trek-like gadgets for those most in need (think: tricorders, genitronic replicators, cryotubes). Sure, you may laugh, but take a closer look at the smartphone in your pocket or the tablet on your desk. It is not as far-fetched as you might think…

To support my bold vision for the future, my family assumes I will eventually have my own private philanthropic foundation. And, if the stars align properly, it could happen. I think the Tobin Family Foundation has a nice ring to it.

In the meantime, I’m looking at a donor advised fund.

While there are many similarities between giving through a donor advised fund and giving through a private foundation, there are important differences:

Starting a donor advised fund is quick.

With relatively few start-up costs, I can create a donor advised fund and impact the causes I care about immediately. Rather than creating the infrastructure needed to support, manage and operate a private foundation, I can focus on the things that matter most to me – my charitable giving and supporting organizations that matter to me.

Better yet – if I establish a donor advised fund at a community foundation, I can feel good knowing that I am supporting a local organization committed to charitable giving and offering an accessible, cost-effective and easy platform for philanthropy.

Donor advised funds are extremely flexible.

As a donor advisor, I can make grant recommendations and rely on the community foundation to handle the award distribution and administrative duties. Rather than worrying about the annual audit and making sure the tax returns are filed properly, I spend my time outside in the sun or volunteering with my favorite nonprofit.

Establishing a donor advised fund at a community foundation also offers some intriguing financial benefits.

A gift of cash to a charitable fund allows a deduction of up to 50% of a donor’s Adjusted Gross Income (AGI). A gift of cash to a private foundation only allows you to only deduct up to 30% of AGI.
You may deduct gifts of closely held long-term appreciated stock at its fair market value, up to 30% of AGI. If the same gift is given to a private foundation, deductions may be limited to its cost basis up to 20% of AGI.

And my favorite…

There are no minimum distribution requirements for a charitable fund at a community foundation. A private foundation must annually distribute at least 5% of its net investment assets, regardless of whether the amount is actually earned.

Of course, it’s all in the eye of the beholder. A private foundation has many perks and several that can’t be ignored. Learning about your options really is the best bet.

I, for one, already know a donor advised fund is in my future. I already have the name – Boldly Go: A Fund for the Future.

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