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Giving Tools
The purpose of a giving tool is simple: transfer assets to charitable causes in a way that makes financial sense for you. While each has similar goals, the giving tool, and how it benefits you, may vary greatly. Picking the right one for your unique needs, such as a private foundation, donor-advised fund, or trust, requires balancing a variety of factors.
Giving Tools
The purpose of a giving tool is simple: transfer assets to charitable causes in a way that makes financial sense for you. While each has similar goals, the giving tool, and how it benefits you, may vary greatly. Picking the right one for your unique needs, such as a private foundation, donor-advised fund, or trust, requires balancing a variety of factors.
What's right for you?
Below are six key factors to consider when choosing a giving tool. Consider rating each based on your unique needs and financial outlook or plan. Click Show More to learn about different giving tools.
While comparing and contrasting your options, keep in mind that many giving tools below can be used together. For example, a donor-advised fund works in conjunction with a private foundation to accommodate non-mission oriented giving or allow for alternative investments.
Tax efficacy
To gain the most effective tax benefit, match the giving tool to the asset that fits the tool. The most tax-effective assets to contribute may be the one you didn't consider, such as complex assets or appreciated securities. Deductibility limits vary and maybe based on the asset donated or the personal benefit derived from the gift.
Cost
The more money spent on fees, means there's less money available for charity impact. Most giving tools have administrative fees to cover overhead, service costs, and accounting expenses. Investment fees may also apply. Over time, high expense ratios may erode returns and decrease charitable impact. Do you know which giving tools have the lowest costs?
Control
How much control or decision-making power do you want over your services, such as grantmaking, investing, or administrative decisions? While strict legal regulations often dictate your control (depending on the giving tool), some tools welcome your input, without allowing direct control over the assets.
Distribution
The benefit of a giving tool is to provide you the convenience and flexibility to support charities that mean the most to you. The giving method you choose should make giving easy. Does your giving tool allow you to support multiple charities at once? Or are you locked into limited distribution?
Leaving a legacy
Establishing a giving legacy could take various forms, such as bestowing to others, naming a charity as a beneficiary, or continuing your family's giving traditions. Some giving tools may not accommodate intergenerational philanthropy. If passing your giving legacy on to future generations is important to you, select a giving tool that allows it.
Recognition
Legally, not all giving options can offer anonymity. For example, private foundations are required to file public reporting returns that include information on grants, trustees, and employees, whereas grants from a donor-advised fund can maintain donor anonymity when preferred.
We think a DAF is a tax-effective and convenient way to give …
Donor-advised fund
A tax-effective way to consolidate, accrue, and grant assets to 501(c)(3) public charities.
Best suited for:
Tax efficacy
Cost
Tax efficacy:
Cost:
Control or level of input:
Distribution to charity:
Legacy options:
Recognition v. anonymity:
Donor-advised funds may only issue grants to other 501(c)(3) public charities. The structure of this option allows charitable assets to be invested in the markets, providing the opportunity for tax-free growth. Minimum initial contributions vary by donor-advised fund. At Vanguard Charitable, the minimum initial contribution to open an account is $25,000. Most individual donor-advised accounts are not subject to annual spending requirements, although many are required to make at least one grant every few years. Donor-advised funds can support a variety of legacy plans.
| Criteria | Characteristic | Details |
|---|---|---|
| Tax efficacy | Full | Full deduction based on fair market value: 60% AGI for cash gifts, 30% for securities held more than one year. |
| Cost | Low | Expenses are minimal (typically less than 1%) and are used to cover organization's investment and administrative costs. |
| Control | Moderate | Recommend investments and grants; no direct control over assets. |
| Distribution to charity | Some restrictions | Generally support any 501(c)(3) public charity as long as you do not personally benefit. |
| Legacy options | Many | Create a personalized succession plan that passes or splits your account to others or donates assets to charity. |
| Recognition v. anonymity | Flexible | Choose if and how your name appears each time you recommend a grant. |
We think a DAF is a tax-effective and convenient way to give …
Donor-advised fund
A tax-effective way to consolidate, accrue, and grant assets to 501(c)(3) public charities.
Best suited for:
Tax efficacy
Cost
Tax efficacy:
Cost:
Control or level of input:
Distribution to charity:
Legacy options:
Recognition v. anonymity:
Donor-advised funds may only issue grants to other 501(c)(3) public charities. The structure of this option allows charitable assets to be invested in the markets, providing the opportunity for tax-free growth. Minimum initial contributions vary by donor-advised fund. At Vanguard Charitable, the minimum initial contribution to open an account is $25,000. Most individual donor-advised accounts are not subject to annual spending requirements, although many are required to make at least one grant every few years. Donor-advised funds can support a variety of legacy plans.
| Criteria | Characteristic | Details |
|---|---|---|
| Tax efficacy | Full | Full deduction based on fair market value: 60% AGI for cash gifts, 30% for securities held more than one year. |
| Cost | Low | Expenses are minimal (typically less than 1%) and are used to cover organization's investment and administrative costs. |
| Control | Moderate | Recommend investments and grants; no direct control over assets. |
| Distribution to charity | Some restrictions | Generally support any 501(c)(3) public charity as long as you do not personally benefit. |
| Legacy options | Many | Create a personalized succession plan that passes or splits your account to others or donates assets to charity. |
| Recognition v. anonymity | Flexible | Choose if and how your name appears each time you recommend a grant. |
But other giving options might also interest you, too.
Charitable gift annuity
A contract established with a charity that allows individuals to transfer assets to the nonprofit organization in return for a partial tax deduction and a fixed income for the donor's lifetime. After the donor dies, the charity keeps the remainder of the gift.
Best suited for:
Tax efficacy
Control or level of input
Tax efficacy:
Cost:
Control or level of input:
Distribution to charity:
Legacy options:
Recognition v. anonymity:
Charitable gift annuities can often be established for as little as $10,000 with organizations like community foundations or universities. Individuals considering this option should engage with a well-run charity that operates in line with their charitable missions.
An effective option for individuals who:
Require income and want to support only one charity by donating easy-to-liquidate assets, such as cash or publicly traded securities.
| Criteria | Characteristic | Details |
|---|---|---|
| Tax efficacy | Limited | Due to income received from annuity, deduction is limited and generally equal to amount of the contribution minus the present value of payments to be made to the donor during his or her life. Donating appreciated assets can provide additional tax advantages. |
| Cost | Low | Minimal costs. |
| Control | Minimal | You choose an organization to receive your donation; then it controls the assets/decision-making. |
| Distribution to charity | Restricted | Limited to one organization, which you choose. |
| Legacy options | Some | At death or end of the annuity contract, the remaining assets go to a charity of your choice. Depending on the sponsoring organization, you may be able to give the remainder to multiple charities. |
| Recognition v. anonymity | Some flexibility | Can remain anonymous to public but not to the sponsoring organization. |
Charitable remainder trust
An arrangement that allows individuals to transfer assets or property to a trust for a partial tax deduction, receive income from the trust for a set period of time, and name a charitable beneficiary of the residual principal of the trust.
Best suited for:
Cost
Control or level of input
Tax efficacy:
Cost:
Control or level of input:
Distribution to charity:
Legacy options:
Recognition v. anonymity:
Charitable remainder trusts are traditionally set up at a financial institution, a process which requires legal expertise. While startup costs and minimums vary, contributions to a trust typically exceed $100,000.
An effective option for individuals who:
Prefer to receive income while fulfilling charitable goals and plan to gift to charity after they die.
| Criteria | Characteristic | Details |
|---|---|---|
| Tax efficacy | Limited | Due to income received from the trust, deduction is limited and generally based on estimated value of remainder interest that will ultimately go to charity. Additional limits may apply if the charity is a private foundation. Donating appreciated assets can provide additional tax advantages. |
| Cost | High | Costs vary greatly across trusts; startup costs can be high. |
| Control | Maximum | Choose income, remainder beneficiaries, and trustee. For greater control, you may serve as the trustee. |
| Distribution to charity | Some restrictions | May change charitable beneficiary over time, as long as the tax deduction for the organization type is less than or equal to the deduction you received for your initial contribution. |
| Legacy options | Some | Choose one or multiple organizations as beneficiaries of your trust. |
| Recognition v. anonymity | Flexible | May choose to remain anonymous or be recognized. |
Direct giving
A donation given directly from an individual to an IRS-approved charity in return for a full tax deduction based on the fair market value of the gift. The vast majority of charitable gifts in the United States are given directly.
Best suited for:
Tax efficacy
Control or level of input
Tax efficacy:
Cost:
Control or level of input:
Distribution to charity:
Legacy options:
Recognition v. anonymity:
Direct giving allows individuals to issue one-time gifts without making a long-term commitment or involving a third party. For donors who are trying to scale their impact, however, direct giving may not be the most efficient giving option—many nonprofits, for example, are unable to accept direct contributions of appreciated securities or complex assets.
An effective option for individuals who:
Gift smaller amounts of cash and prefer to personally manage their investments and contributions. Want their donations to go directly to charitable causes.
| Criteria | Characteristic | Details |
|---|---|---|
| Tax efficacy | Full | Full deduction based on fair market value. Certain limits may apply depending on the nature of the assets donated and if the charity receiving the donation is a private foundation. |
| Cost | None | No costs incurred when giving directly. |
| Control | Maximum | You manage all donation decisions and may work with a charity to determine the timing, type, and recognition of a gift. |
| Distribution to charity | No restrictions | May donate to any nonprofit organizations you choose subject to certain deduction limitations. |
| Legacy options | None | None, unless you establish a deferred gift plan with a charity of your choice. |
| Recognition v. anonymity | Some flexibility | Choose when and how you and your gift are represented each time you give; may be challenging to give anonymously. |
Private Foundation
An independent charitable organization with governing legal documents and a governing body with complete control over investment and grantmaking decisions.
Best suited for:
Tax efficacy
Control or level of input
Tax efficacy:
Cost:
Control or level of input:
Distribution to charity:
Legacy options:
Recognition v. anonymity:
Generally, start-up costs exceed $15,000, but ongoing operating, legal, and accounting costs will vary. Private foundations are subject to a 1-2% excise tax on the annual net investment income, require a 5% annual distribution of the net investment assets yearly, and must file an annual IRS Form 990-PF.
An effective option for individuals who:
Require total control over charitable activity, wish to involve family members in management of charitable assets, and are comfortable following strict compliance and granting regulations.
| Criteria | Characteristic | Details |
|---|---|---|
| Tax efficacy | Partial | Deduction based on fair market value: 30% AGI for cash gifts, 20% for securities held more than one year; not a good vehicle for the donation of appreciated securities other than publicly traded securities. |
| Cost | High | Startup and maintenance costs are extensive; PF is subject to 1-2% excise tax on annual net investment income. |
| Control | Maximum | You manage contributions, investing, and granting activity, as well as legal documents. |
| Distribution to charity | Some restrictions | Support any charitable cause subject to certain tax regulations; some foundations do not allow grants outside their mission. |
| Legacy options | Many | Succession plans can involve future generations, or remaining assets can be granted directly to a public charity. |
| Recognition v. anonymity | Not Flexible | Required to make public information about trustees or directors, certain employees, grants, income, and investments. |
But other giving options might also interest you, too.
Charitable gift annuity
A contract established with a charity that allows individuals to transfer assets to the nonprofit organization in return for a partial tax deduction and a fixed income for the donor's lifetime. After the donor dies, the charity keeps the remainder of the gift.
Best suited for:
Tax efficacy
Control or level of input
Tax efficacy:
Cost:
Control or level of input:
Distribution to charity:
Legacy options:
Recognition v. anonymity:
Charitable gift annuities can often be established for as little as $10,000 with organizations like community foundations or universities. Individuals considering this option should engage with a well-run charity that operates in line with their charitable missions.
An effective option for individuals who:
Require income and want to support only one charity by donating easy-to-liquidate assets, such as cash or publicly traded securities.
| Criteria | Characteristic | Details |
|---|---|---|
| Tax efficacy | Limited | Due to income received from annuity, deduction is limited and generally equal to amount of the contribution minus the present value of payments to be made to the donor during his or her life. Donating appreciated assets can provide additional tax advantages. |
| Cost | Low | Minimal costs. |
| Control | Minimal | You choose an organization to receive your donation; then it controls the assets/decision-making. |
| Distribution to charity | Restricted | Limited to one organization, which you choose. |
| Legacy options | Some | At death or end of the annuity contract, the remaining assets go to a charity of your choice. Depending on the sponsoring organization, you may be able to give the remainder to multiple charities. |
| Recognition v. anonymity | Some flexibility | Can remain anonymous to public but not to the sponsoring organization. |
Charitable remainder trust
An arrangement that allows individuals to transfer assets or property to a trust for a partial tax deduction, receive income from the trust for a set period of time, and name a charitable beneficiary of the residual principal of the trust.
Best suited for:
Cost
Control or level of input
Tax efficacy:
Cost:
Control or level of input:
Distribution to charity:
Legacy options:
Recognition v. anonymity:
Charitable remainder trusts are traditionally set up at a financial institution, a process which requires legal expertise. While startup costs and minimums vary, contributions to a trust typically exceed $100,000.
An effective option for individuals who:
Prefer to receive income while fulfilling charitable goals and plan to gift to charity after they die.
| Criteria | Characteristic | Details |
|---|---|---|
| Tax efficacy | Limited | Due to income received from the trust, deduction is limited and generally based on estimated value of remainder interest that will ultimately go to charity. Additional limits may apply if the charity is a private foundation. Donating appreciated assets can provide additional tax advantages. |
| Cost | High | Costs vary greatly across trusts; startup costs can be high. |
| Control | Maximum | Choose income, remainder beneficiaries, and trustee. For greater control, you may serve as the trustee. |
| Distribution to charity | Some restrictions | May change charitable beneficiary over time, as long as the tax deduction for the organization type is less than or equal to the deduction you received for your initial contribution. |
| Legacy options | Some | Choose one or multiple organizations as beneficiaries of your trust. |
| Recognition v. anonymity | Flexible | May choose to remain anonymous or be recognized. |
Direct giving
A donation given directly from an individual to an IRS-approved charity in return for a full tax deduction based on the fair market value of the gift. The vast majority of charitable gifts in the United States are given directly.
Best suited for:
Tax efficacy
Control or level of input
Tax efficacy:
Cost:
Control or level of input:
Distribution to charity:
Legacy options:
Recognition v. anonymity:
Direct giving allows individuals to issue one-time gifts without making a long-term commitment or involving a third party. For donors who are trying to scale their impact, however, direct giving may not be the most efficient giving option—many nonprofits, for example, are unable to accept direct contributions of appreciated securities or complex assets.
An effective option for individuals who:
Gift smaller amounts of cash and prefer to personally manage their investments and contributions. Want their donations to go directly to charitable causes.
| Criteria | Characteristic | Details |
|---|---|---|
| Tax efficacy | Full | Full deduction based on fair market value. Certain limits may apply depending on the nature of the assets donated and if the charity receiving the donation is a private foundation. |
| Cost | None | No costs incurred when giving directly. |
| Control | Maximum | You manage all donation decisions and may work with a charity to determine the timing, type, and recognition of a gift. |
| Distribution to charity | No restrictions | May donate to any nonprofit organizations you choose subject to certain deduction limitations. |
| Legacy options | None | None, unless you establish a deferred gift plan with a charity of your choice. |
| Recognition v. anonymity | Some flexibility | Choose when and how you and your gift are represented each time you give; may be challenging to give anonymously. |
Private Foundation
An independent charitable organization with governing legal documents and a governing body with complete control over investment and grantmaking decisions.
Best suited for:
Tax efficacy
Control or level of input
Tax efficacy:
Cost:
Control or level of input:
Distribution to charity:
Legacy options:
Recognition v. anonymity:
Generally, start-up costs exceed $15,000, but ongoing operating, legal, and accounting costs will vary. Private foundations are subject to a 1-2% excise tax on the annual net investment income, require a 5% annual distribution of the net investment assets yearly, and must file an annual IRS Form 990-PF.
An effective option for individuals who:
Require total control over charitable activity, wish to involve family members in management of charitable assets, and are comfortable following strict compliance and granting regulations.
| Criteria | Characteristic | Details |
|---|---|---|
| Tax efficacy | Partial | Deduction based on fair market value: 30% AGI for cash gifts, 20% for securities held more than one year; not a good vehicle for the donation of appreciated securities other than publicly traded securities. |
| Cost | High | Startup and maintenance costs are extensive; PF is subject to 1-2% excise tax on annual net investment income. |
| Control | Maximum | You manage contributions, investing, and granting activity, as well as legal documents. |
| Distribution to charity | Some restrictions | Support any charitable cause subject to certain tax regulations; some foundations do not allow grants outside their mission. |
| Legacy options | Many | Succession plans can involve future generations, or remaining assets can be granted directly to a public charity. |
| Recognition v. anonymity | Not Flexible | Required to make public information about trustees or directors, certain employees, grants, income, and investments. |
