Advertisement

April 19, 2014

Choosing the Right Charitable Vehicle: A Comparison of Private Foundations, Supporting Organizations, and Donor Advised Funds

Executive Summary. Many different types of vehicles are available for charitable giving. For large gifts, it is important for philanthropists to choose a vehicle that is right for their goals and needs. Common considerations in choosing the right vehicle include:

  • Start-up costs;

  • Maintenance and compliance requirements;

  • Level of control for the donor; and

  • Type of property to be donated.

This outline provides a summary comparison of charitable vehicles.

Charitable Vehicles. For large gifts, donors have several general choices, including:

  • A direct gift to a charity;

  • Establishing a Donor Advised Fund;

  • Establishing a Supporting Organization;

  • Establishing a Private Foundation; and

  • Charitable Trusts.

A description of each type of vehicle is below, followed by a chart comparison.

Direct Gifts. A direct gift to a charity is a straightforward gift to a charity, potentially under a gift agreement. With a direct gift, a donor has limited oversight over the gift and no ongoing management responsibility for the gift. Direct gifts are typically best for a donor that wants to support a specific charity, without providing oversight or management on an ongoing basis. Alternatively, if the donor would like to establish an ongoing grant program, teach family members the joys of charitable giving, or establish a family fund or foundation, another charitable vehicle is more appropriate.

Donor Advised Funds. Donor advised funds are held and administered by other charitable entities, including:

  • Community Foundations, which typically focus on giving to charitable programs in a local region or community;

  • National sponsors (such as the Fidelity Charitable Gift Fund, the Schwab Fund for Charitable Giving and the Vanguard Charitable Endowment Program);

  • Other Public Charities, such as schools and hospitals.

Donor Advised Funds are typically easy to set up and require minimal administrative tasks from the donor after the fund is established. Funds can typically be named after the donor, such as the "The Smith Family Foundation." Donor Advised Funds can allow a donor an immediate charitable tax deduction for a fund or endowment that will last for years.

Private Foundations. Private foundations are privately-funded charitable organizations. Typically, a private foundation makes grants to other organizations rather than conducting its own charitable activities. Private foundations offer a maximum level of control to donors. A donor can fully control the board of a private foundation. While offering donor control, private foundations are subject to restrictive tax rules and require ongoing administrative management.

Supporting Organizations. Supporting organizations are charities organized to support one or more other charities (each a "supported organization"). A supported organization is usually a public charity. By supporting another charity, a supporting organization avoids being classified as a "private foundation," thus avoiding many of the restrictive regulations applicable to private foundations. However, supported organizations are typically controlled by the supported organization (rather than the donor) and the purposes of the supporting organization are limited to supporting the supported organizations. Supporting organizations require ongoing administration and management.

Charitable Trusts. Charitable Trusts (such as charitable lead trusts and charitable remainder trusts) can be useful estate planning tools. Please contact one of our estate planning team members to learn more about the use of charitable trusts in your estate plan.

Comparison Charts. Key advantages and disadvantages of starting a donor advised fund, private foundation or supporting organization are outlined on the chart, followed by a comparison chart of the general tax and compliance regulations applying to each type of charitable vehicle. These charts are not intended to be comprehensive, but instead compare a few aspects of the different types of charitable vehicles available to a donor.

Copyright © 2014 Godfrey & Kahn S.C.

About the Author

Jennifer M. Olk, Estate Planning Attorney, Godfrey Kahn Law Firm
Attorney

Jennifer M. Olk focuses her practice in estate planning and administration. She assists her clients with all aspects of estate planning including marital property, charitable gift planning, business succession planning and disability planning. Her practice provides clients with tailored estate plans that accomplish her clients’ objectives in a tax efficient manner.

414-287-9604

About the Author

Wendy Richards, Tax, Employee benefits Attorney, Godfrey Kahn Law Firm
Member

Wendy Richards is a member of the Tax & Employee Benefits Practice Group. Each day, she provides counsel to clients on how to practically navigate federal and state tax law issues. As a resource for attorneys across the firm and clients (local and nationwide), Wendy has direct experience on a broad range of tax matters. Representative projects include equity financing transactions, mergers, acquisitions and reorganizations, including those involving pass-through entities. Wendy drafts operating agreements for LLCs, advises on S corporation issues, and has assisted clients with business...

414-287-9227

Boost: AJAX core statistics

Legal Disclaimer

You are responsible for reading, understanding and agreeing to the National Law Review's (NLR’s) and the National Law Forum LLC's  Terms of Use and Privacy Policy before using the National Law Review website. The National Law Review is a free to use, no-log in database of legal and business articles. The content and links on www.NatLawReview.com are intended for general information purposes only. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor.  

Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is www.NatLawReview.com  intended to be  a referral service for attorneys and/or other professionals. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional.  NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. 

Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Statement in compliance with Texas Rules of Professional Conduct. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials.

The National Law Review - National Law Forum LLC 4700 Gilbert Ave. Suite 47 #230 Western Springs, IL 60558  Telephone  (708) 357-3317 If you would ike to contact us via email please click here.