Privacy is yet another benefit. "Donors can make gifts anonymously with a giving account," Libbey says. Contrariwise, a private foundation's 990-PF is readily available to the public (see www.GuideStar.org) and discloses who the donor and board members are, the foundation's level of assets, the recipients of grants, and more.
For the client who might add to his charitable pot in the future, consider the larger income tax deductions that gifts to donor-advised funds produce. For contributions of cash and public securities, the donor is entitled to deduct up to 50% and 30% of adjusted gross income, respectively, compared with 30% and 20% when these assets go into a foundation. Contributions of real estate and other property are deductible at market value, versus at cost basis if donated to a foundation.
A final difference is that with a giving account, there are no mandatory annual distributions, Roe points out. "That gives the client some flexibility in the timing of his charitable giving" compared to a private foundation, which must give 5% of net assets out to charity annually, he says.
Favoring Foundations
Paramount prestige comes with one's own foundation. So does unfettered control. Attorney Sally Venverloh tells her clients, "With a private foundation you are running the show. You have maximum flexibility regarding how the assets are invested and where the money goes," says Venverloh, who is president of NGE Philanthropic Advisors, a division of Chicago-based law firm Neal, Gerber & Eisenberg LLP.
Foundations may make grants to individuals if strict rules are followed, whereas donor-advised funds can't at all. And even though private foundation money cannot be used to fulfill the pledge obligations of the founders, directors or officers, the foundation itself may make a pledge with strings attached to another charity payable over several years. "It's harder to accomplish that in the context of a donor-advised fund," Venverloh says.
The client likewise needs a foundation if his goal is to pay staff (perhaps a young family member) or to create a philanthropic legacy within the family. "When structured and operated properly," says Venverloh, "a private foundation can be a platform for uniting the family for a common purpose and bridging communication gaps."
Giving accounts don't offer that. Even if the account can be passed to successor advisors that the donor named while he was alive, the successors act independently. The sponsoring charity might even split the account among the designated parties and literally send them their separate philanthropic ways.
Lean toward a foundation if the client aims to make gifts with complex arrangements. Suppose he wants to help construct a building but wishes to pay for it in stages, to make sure the project makes adequate progress. "A private foundation is better equipped to monitor the charity and make sure it's meeting the target requirements," Venverloh says.
But some donor-advised funds handle unusual, customized gifts. Calvert Giving Fund is among the more adventurous in this regard. Applying "heightened levels of fiduciary oversight," Freundlich says, "we will approve grants to non-profits other than 501(c)3s and to for-profit enterprises to accomplish very carefully scoped charitable purposes."
As an example of the latter, he proudly points to a documentary about Native American rights that one donor wanted to fund. "We hired a production company and paid for it out of his giving account. We can administer projects with expenses, although we are very, very careful about it," Freundlich says.