Year End Considerations: Donor Advised Funds & Private Foundations %

Year End Considerations: Donor Advised Funds & Private Foundations

December 22, 2020

At this time of year, many of your clients may be seeking to integrate their tax, financial and family philanthropy goals in their efforts to maximize the benefits of their charitable giving. Often, they consider establishing a Donor Advised Fund (DAF) or a Private Foundation (PF). While both charitable vehicles enable donors to conduct their philanthropy in a strategic manner, one of the vehicles or a combination of both may be more appropriate, depending upon your clients’ overall goals.

To determine the charitable vehicle that best suits your clients’ needs, you and your clients may refer to the chart below, which contrasts some of the tax, financial and administrative considerations associated with DAFs and PFs.

DAFs or PFs

Can a DAF Complement a PF?

Most donors will elect to establish either a DAF or a PF; however, for varying reasons, some PF donors will also establish a DAF with a DAF sponsor (such as CCF). In those cases, the PF donors seek to satisfy their 5% annual distribution requirement by contributing that amount into their new DAF. In addition, they count on CCF’s ability to provide programmatic and grantmaking expertise and guidance and strategically conduct their further grantmaking on their own timeline.

Can Your Client Convert their PF into a DAF?

Yes, absolutely. On an increasing basis, some PF donors have found the costs and administrative burdens associated with PFs as too onerous. As such, they have elected to terminate their PF by transferring its assets into a DAF. Concurrently, they conduct all of the steps necessary to comply with the state and federal regulations required to terminate a PF. However, they can continue to achieve their grantmaking goals, with less cost and effort, through their CCF DAF.

Donors who establish DAFs with CCF also enjoy many other benefits. In addition to gaining access to CCF’s programmatic expertise and knowledge of the greater Los Angeles nonprofit community, donors also value CCF’s Family Philanthropy services. Moreover, many donors take advantage of CCF’s Gift Planning services. As members of CCF’s Sartori Circle (Legacy Society), they receive guidance and personalized giving plans that enable CCF to achieve their charitable legacy goals long beyond their lifetimes.

CCF’s charitable experts are available to partner with you as you guide your clients through these important considerations. For additional detailed information related to CCF’s DAF and PF-related services, please feel free to contact: William Strickland, JD, CSPG and George Dulgeryan, JD, LLM, CSPG at (213) 413-4130.

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