Here, we’ll thoroughly cover where donor-advised funds and private foundations overlap and where they vary so you can make the best decision for your philanthropy.

What do donor-advised funds and private foundations have in common?

Both donor-advised funds and private foundations allow individuals to contribute, or donate, to the account or foundation. Funds are invested for charitable purposes and can then grow. 

Funds can be granted out to other charitable organizations as recommended by the advisor of the DAF or by the board of directors overseeing the private foundation. Both take a variety of assets as contributions, including illiquid assets. 

Both giving vehicles also allow you to give in perpetuity if you choose: advisory privileges (for DAFs) or management (for private foundations) can be passed on to the next generation or assets can be granted out to charities upon the donor’s passing.

The differences of donor-advised funds and private foundations

Key Takeaways

In the first edition of Why Giving Matters, granting and survey data revealed that a DAF empowers donors to give more to charity and to give more effectively, with these benefits only increasing over time. In this edition, we focus on how donors can use their DAF flexibly to respond to both their longstanding charitable commitments as well as supporting emergent needs. Our findings confirmed the power of a DAF—but they also revealed an effect unexpected giving has that surprised everyone. 

How are donors able to respond to a great variety of causes with one charitable giving vehicle? How effective is a DAF in supporting donors’ various charitable interests? Read the report now to get answers to these questions and more.

Why Giving Matters: Responsive giving at donor-advised funds spurs greater total giving

Vanguard Charitable donors are free to recommend grants from their account to any 501(C)(3) public charity. While donors may have charitable causes or organizations that have long been important to them, they can also use their DAF for flexible giving—responding to emergent events or new information about different causes. 

Survey and granting data revealed that donors use their DAFs for both long-term, prioritized charitable giving and responsive, unexpected giving. We wanted to understand how well donors could give to emergent events without displacing their typical, ongoing giving. 

And the results are staggering. In fact, one powerful impact of unexpected giving on donor behavior was not at all one we expected to see!

In this year’s donor-advised fund (DAF) report, we explore both the long-term sustainability of DAFs and the flexibility of this powerful giving vehicle. Why Giving Matters is based on a new survey of Vanguard Charitable donors and a decade of data on the philanthropic giving of Vanguard Charitable donors. 

Please complete the form below to download the report.

Can private foundations and DAFs be used together?

While you may choose just one giving vehicle, it’s important to note that someone with a private foundation can open a DAF and vice versa to leverage the benefits of both options. While a DAF cannot grant to a private foundation, a private foundation can give to a DAF. This can mean greater flexibility for your overall giving.

Which is right for you: DAF or private foundation?

When choosing between a donor-advised fund and private foundation, you should first identify your philanthropic goals. Depending on your charitable giving approach, one will likely be better for you than the other. Carefully review the differences above and consider how they align with your approach to giving. 

However, DAFs are easier to setup and manage as the administrative requirements are all the responsibility of the account’s sponsor. It’s also more cost-effective, meaning your donations go to charity rather than fees, payroll, and investment taxes. 

If you’re looking to maximize the tax benefits of strategic charitable giving, grant with timeline and acknowledgement flexibility, and keep costs low to give more to charity without having to operate a standalone charitable organization, a donor-advised fund is likely right for you.