Private Foundations vs. Donor-Advised Funds: Critical Differences

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Categories: Advisors

Search Topics: Foundations vs. Donor-Advised Funds

Although many advisors are under the impression that a donor-advised fund (DAF) are “just like” a private foundation, there are important differences—most of which originate in one distinction that makes a world of difference: A private foundation is an organization controlled by its founder and directors. It is a distinct legal entity with its own character, mission, and bylaws. A DAF, on the other hand, is a giving account—like a bank account—that is housed in a community foundation or a public charity created by a financial institution. And all legal control over that account rests with the sponsoring organization, not the donor. This article explores the impact of this critical distinction.

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