Private Foundation or Family Foundation? How to Simplify Your Family Giving in 2019

Family Foundation with Donor-Advised Funds
Donor-advised funds can serve as a family foundation with name recognition and multi-generational giving, if desired, without the technical headaches.

Winston Churchill said, “We make a living by what we get, but we make a life by what we give.”

Now more than ever, people are wanting to make a difference.

Giving to charities exceeded $410 billion for the first time in the United States in 2017. With so much turmoil in the world, it feels good to take action, no matter how big or small, and support nonprofit causes that mean something to you.

Committing to give is the first step, but deciding how best to do it is next.

Starting a Private Foundation

Some feel they must have their “own” private foundation for their charitable purposes and family recognition.

However, starting a private foundation is like starting a new business. There can be expensive start-up fees, legal fees, CPA fees, investment management fees, administrative fees and required tax filings.

You will also need individual expertise on laws governing nonprofit entities and penalties for doing things wrong, even if unintentional.

Establishing your private foundation’s purpose and learning the nonprofit landscape can be time consuming, especially without expert support.

Still, there are advantages to a private foundation, such as family control over investments and a family brand that can last for generations. But do the expenses, administration and complexity make it the best choice?

The idea is to feel good about giving, rather than frustrated.

Keep it simple: There is another option!

Open a Family Foundation at a Community Foundation

Opening a family foundation through a donor-advised fund at a community foundation is simple.

It provides the benefits of a private foundation, plus additional benefits, such as no start-up costs, no need to establish a tax-exempt status and no annual investment income excise tax.

Unlike an IRS private foundation, a donor-advised fund does not need to disclose certain financial information, including private tax return details. There are no complex legal requirements like a private foundation, including compensation rules, grant expenditure responsibility and the possibility of inadvertent self-dealing.

Also, donor-advised funds do not require an annual 5 percent payout requirement; private foundations do.

Donor-advised funds can serve as a family foundation with name recognition and multi-generational giving, if desired, without the technical headaches.

“Converting our private foundation to a donor-advised fund at The San Diego Foundation allowed our large extended family to experience the joy of carrying on the legacy of our grandparents,” shared Bob Fletcher, whose family has given back to San Diego for multiple generations.

Bob shared that the extended Fletcher family convenes twice per year at The Foundation to discuss community needs and recommend grants. “We use these meetings not only to carry out the family’s philanthropic mission, but as a reunion and time to reconnect,” he added.

Other benefits of donor-advised funds include:

  • Donor’s information remains private
  • Donor can retain advisory capacity over grants to be made annually
  • Community foundation staff provide administrative and grantmaking support
  • Donors can deduct up to 60 percent of their adjusted gross income (AGI) with cash gifts compared to only 30 percent with a private foundation.
  • Sophisticated investment options and fiduciary responsibility are managed by experts at the community foundation

Learn More about Comparative Advantages

Simplify with a Donor-Advised Fund

When you add up the benefits, it’s no surprise that many of the donors at The San Diego Foundation who originally considered a private foundation, decided to simplify and open a donor-advised fund instead.

Our expert staff can work with you and your advisors to start your own family foundation or convert an existing private foundation. We’re here to support your philanthropic desires and remove unnecessary barriers and complexity.

We want you to always feel good about giving!

Learn More about Donor Advised Funds


About Cami Mattson

Cami Mattson

As Director of Development & Stewardship, Cami leads strategy and management of new business. She increases philanthropy across the region by working with new donors who want to make an impact and assist those in need. Cami helps San Diegans personalize their giving through donor-advised funds and by joining existing funds at The San Diego Foundation.

More about Cami