Using a donor-advised fund, you can make a donation to your fund, receive a tax deduction in the year of the donation, and then have you and your family remain actively involved in the fund’s charitable grantmaking for unlimited generations. A donor-advised fund at The Community Foundation can make grants to any charity in the United States, including houses of worship, schools and universities. The Community Foundation minimum for a donor-advised fund is $5,000 with a requirement that the fund size reach $50,000 by the third year.
Many of our donors view donor-advised funds much like a family foundation. Click here for a chart comparing the tax and operational attributes of family foundation options. A donor-advised fund works in a fashion similar to a private foundation, but with greater tax advantages and with fewer administrative burdens than a private foundation. Below are several differentiating factors:
Administrative Aspects of a Donor-advised Fund
- Created at no cost by simply filling out a fund agreement. Unlike a private foundation, there are no associated legal fees or application for approval from the IRS.
- Not subject to a 5% payout requirement. Though donor-advised funds at The Community Foundation regularly pay out more than 10% of their balance each year, there is no legal requirement to make grants in a given year. Likewise, there is no maximum amount that a donor may request to pay out to charities.
- Not subject to an excise tax on investment income.
- Does not require separate tax identification status or an annual tax return.
Tax Deductibility of Gift
- Gifts of publicly traded securities are generally deductible at 100% of the fair market value, including capital gain, up to 30% of the donor’s adjusted gross income (with a five-year carry forward), while gifts of publicly traded securities to a private foundation are only deductible up to 20% of the donor’s adjusted gross income (with a five-year carry forward)
- Gifts of cash are deductible up to 50% of the donor’s adjusted gross income (with a five-year carry forward), while gifts of cash to a private foundation are only deductible up to 30% of the donor’s adjusted gross income (with a five-year carry forward)
- Gifts of private assets (e.g. real estate, private company stock) are deductible at their fair market value up to 30% of the donor’s adjusted gross income (with a five-year carry forward), while gifts of private assets to a private foundation are only deductible at the contributor’s tax basis up to 20% of the donor’s adjusted gross income (with a five-year carry forward)
Cost-Effective Administration
In addition to greater tax advantages over private foundations, a fund in a community foundation is generally more cost effective than a private foundation. The Community Foundation charges annual administrative fees as follows:
- First $100,000 100 basis points
- Next $400,000 85 basis points
- Next $500,000 70 basis points
- >$1 million 65 basis points
Professional Philanthropic Service
- Our staff provides personalized attention to donors. Once a donor-advised fund is created, the donor is assigned a Philanthropic Advisor (a Foundation professional whose expertise is strategic grantmaking) to work directly with the donor and family to explore and meet their philanthropic goals. Click here to learn more.
- For funds greater than $250,000 or planned gifts greater than $1 million, donors have access to community foundation program staff, family meetings, site visits, special events and philanthropic research at no additional cost. This premium service level allows donors to become a member of our Center for Family Philanthropy. For a comprehensive chart comparing our service levels click here.