What’s the Difference: Donor Advised Funds vs. Private Family Foundations
When starting your philanthropic journey, it is just as important to plan how you are going to give as it is to decide the cause you want to support. Understanding the difference between a Donor Advised Fund and a Private Family Foundation, and deciding which is right for you, is a great starting point for this journey.
What is a Donor Advised Fund?
A Donor Advised Fund (DAF) is a more hands-on philanthropic vehicle that allows you to make contributions to a dedicated fund, receive a tax receipt, and then recommend grants from the fund to your favourite charities over time.
One of the key benefits of a DAF is the ability for you to separate the timing of your charitable contribution from the process of deciding which charities will ultimately benefit. This flexibility allows you to contribute assets such as cash, stocks, or real estate into the DAF and then strategically distribute those funds over time.
Additionally, DAFs provide an added layer of privacy for donors who wish to remain anonymous in their charitable giving. By making grants from the fund rather than directly from your personal accounts, you can maintain confidentiality while still supporting causes you care about.
Overall, DAFs offer you a streamlined approach to managing your philanthropy by providing flexibility and an ability to decide exactly which charities benefit from your donation , and ensuring privacy in charitable giving.
What is a Private Family Foundation?
A Private Family Foundation (PFF) allows you to create a lasting impact on society while also fostering unity and shared values among family members. This type of foundation is typically funded by a family’s wealth and is managed by family members or trusted advisors.
One of the key benefits of establishing a PFF is the ability to support causes that are important to you. PFFs make it easy for your family to direct its philanthropic efforts toward the exact issues or communities that you are passionate about; there is no outside influence.
Moreover, PFFs offer you a structured way to give back to society while also providing tax benefits. Donations made through the foundation can be tax-deductible, allowing you to maximize your charitable contributions while minimizing your tax liabilities.
In addition to the financial benefits, PFFs can serve as a platform for educating future generations about philanthropy and instilling the value of giving back to younger generations. By involving the younger generations in the foundation’s activities, you can pass down important values and lessons about social responsibility and community engagement.
Overall, PFFs are not just about giving money; they are about creating a legacy of philanthropy and community involvement that can be passed down from generation to generation.
Which is Right for You?
Ultimately, when deciding between a DAF or a PFF the choice depends on your preferences regarding control, involvement, tax benefits, costs, and long-term charitable goals. Consulting with a trusted financial professional or philanthropic expert can help you make an informed decision based on your unique circumstances.
This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.