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Transitioning from Private Foundations to Donor Advised Funds
Making the Transition from Private Foundations to Donor-Advised Funds
A GUIDE FOR FAMILY OFFICES
For multi-family offices managing the philanthropic needs of ultra-high-net-worth individuals (UHNWIs), private foundations have traditionally been the preferred vehicle.
However, donor-advised funds have emerged as a more flexible, cost-effective solution. Transitioning from private foundations to donor-advised funds (DAFs) can be a strategic move for family offices managing significant wealth.
COMPARISON OF DONOR ADVISED FUNDS AND PRIVATE FOUNDATIONS
Private foundations offer full control over grant-making and the ability to fund non-charitable entities like individuals or scholarships. However, they come with significant administrative burdens—board meetings, staff oversight, annual tax filings, and excise taxes on investment income. Private foundations also require a 5% annual payout and public disclosure of grants and financials.
Donor-advised funds, in contrast, offer higher tax deductions and eliminate excise taxes. They provide flexibility in grant recommendations to 501(c)(3) organizations, with the option for anonymous giving. Administrative tasks are handled by the sponsoring organization, significantly reducing the workload and cost.
Consider these key differences between DAFs and Private Foundations:
THE BENEFITS OF DONOR ADVISED FUNDS
- TAX EFFICIENCY - DAFs provide immediate tax deductions and allow assets to grow tax-free, maximizing philanthropic impact over time.
- SIMPLIFIED ADMINISTRATION - Unlike private foundations, DAFs require no board meetings, staff, or complex filings. This streamlined approach is ideal for families looking to focus on impact rather than compliance.
- FLEXIBLE GIVING - DAFs offer flexible investment options and the ability to recommend grants at any time, without the minimum annual distribution requirement of private foundations. Grant activity can be kept private and anonymous with a DAF.
HOW TO CONVERT A PRIVATE FOUNDATION TO A DONOR ADVISED FUND
Our platform makes it simple to transition from private foundations to donor-advised funds.
- REVIEW FOUNDATION DOCUMENTS - Assess the foundationʼs charter and bylaws for any legal restrictions on asset transfers.
- SELECT A DONOR ADVISED FUND SPONSOR - Choose a reputable donor-advised fund sponsor that aligns with the familyʼs philanthropic goals and values.
- TRANSFER ASSETS - Liquidate or transfer the foundationʼs assets to the donor-advised fund. Non-cash assets, such as publicly traded securities or real estate, can often be donated directly to maximize tax benefits.
- DISSOLVE THE FOUNDATION - After transferring assets, formally dissolve the private foundation in accordance with state regulations and notify the IRS.
- ENGAGE THE FAMILY - Use the new donor-advised fund to involve family members in grant-making decisions and foster connections across generations.
THE PREFERRED DAF PLATFORM FOR FAMILY OFFICES
Our platform partner offers a unique donor-advised fund platform tailored to the needs of Multi-Family Offices and their UHNWI clients:
- Low-Cost DAF - Allow your clientsʼ charitable dollars to go further and drive greater impact. A transparent, simple fee structure with no investment fees on the administration of the fund.
- Family Giving Flows - Millennials and Gen Z will inherit an estimated $124 trillion through 2045. Giveʼs Family Engagement functionality brings the next generation into the fold of giving, helping you to cultivate relationships with client heirs and retain them upon legacy transfers.
- Investment Flexibility - With multi-custodial SMA options, your office can manage investments without feeling captive to a fixed menu of options. Your advisor will collaborate with your team to develop a custom IPS based on family desires.
- Team-Wide Access - It can take a village to serve clientsʼ comprehensive needs. Add multiple team members to any client DAF account and assign different roles for advisors, operations, administration, and more.
- Highest Degree of Information Security - In the Information Age, your clients require a high degree of security. The Give platform is certified as SOC II compliant, the standard for data security, privacy, confidentiality, and processing integrity.
- Seamless Account Opening - In under five minutes, you can invite a client and launch the DAF with little to no effort on your part – technology and our team handle this.
- Streamlined Onboarding - Giveʼs dedicated Support team provides an onboarding package, including customized emails to communicate the transition with clients, marketing materials outlining client benefits, and more.
A TRANSFORMATIONAL SHIFT
Transitioning from a private foundation to a donor-advised fund is more than a shift in structure. Itʼs a move toward greater flexibility, efficiency, and family engagement. With our platform ,family offices can offer their clients a modern philanthropic experience that aligns with both financial and legacy-building goals.
Connect with your Ingalls advisor to discuss your charitable giving needs, including whether a Donor Advised Fund is the right vehicle for you.
About Our Partner
TIFIN Give is a modern charitable platform, providing a simple, intuitive and flexible investment- and giving experience that modernizes Donor-Advised Funds and other charitable structures. The TIFIN Give platform is the only DAF designed from inception to engage multigenerational donors and enhance the traditional DAF model.
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