If you’ve heard about private foundations opening donor-advised funds (DAFs) and wondered “Why would you need both?”, you’ve found your answer. Read on for insights into how these two giving vehicles can be a powerful combination. 

The basics of private foundations and donor-advised funds 

Typically, donors will choose between a private foundation and a DAF. Both giving vehicles allow individuals to contribute, or donate, to the account or foundation. The donated funds are committed to charitable purposes and are invested to potentially grow while being granted out. 

Despite their similarities, there are many variables that might make a donor-advised fund or a private foundation a better choice over the other. It all depends on what a donor is looking for in their giving vehicle. For example, a DAF is easier to establish, and donors can rely on the DAF sponsor to handle administrative requirements. Establishing a private foundation, on the other hand, is more complex and leaves the donor with all the administrative responsibilities, though they can select a board and staff to run their foundation. 

You can learn more about the differences between private foundations and donor-advised funds at the link below.

Can a private foundation give to a donor-advised fund? 

While a donor might select one giving vehicle over the other, they don’t have to. It’s easy for private foundations to add a DAF to their larger philanthropic strategy. This is because private foundations can issue grants to donor-advised funds. 

While there are restrictions on the types of organizations private foundations can give to, private foundations can give to public charities. As a DAF sponsor, Vanguard Charitable is a 501(c)(3) public charity. Funds contributed to a DAF from a private foundation are committed to charity and grants subsequently must go to public charities in good standing with the IRS. 

Reasons for adding a DAF to your philanthropic toolkit 

Private foundations and DAFs each have unique benefits. Adding a DAF to your philanthropic strategy, even if you already have a private foundation, increases your giving potential. 

We spoke with our donors who leverage both a private foundation and a DAF to support their philanthropic goals. Here are a few reasons they offered about why they added a Vanguard Charitable DAF to their giving portfolio: 

• Charitable giving flexibility. With a DAF, you can grant to any 501(c)(3) public charity in good standing with the IRS. You can also set your own giving timelines. By opening a Vanguard Charitable account, you get all the flexibility of a DAF while still maintaining your private foundation. 

• Low-cost, high-quality investments. Opening a Vanguard Charitable DAF gives you immediate access to a carefully curated list of high-quality investment options with solutions to fit any investing strategy. Some donors use their DAF to leverage the same investments they have at their private foundation but for a lower cost. 

• Reduced costs on your philanthropy. With the industry’s lowest all-in fee, Vanguard Charitable helps you grow your philanthropy without growing your expenses. And these low fees translate to access to expert charitable guidance and account support. 

• Support for complex charitable giving. Whether you’re wanting to directly contribute complex assets or looking for help with international or complex granting, you can find best-in-class support with Vanguard Charitable.