Donor-advised fund vs private foundation: cost, control, tax and legacy, in the US, UK, Canada and Australia
The two main vehicles for family giving, compared on the six things families actually decide on, with the local equivalents in each country.
General information, not advice.
The decision in one table
| Donor-advised fund | Private foundation |
|---|---|---|
Set-up | Days; a form | Months; lawyers, registration with the tax authority and, in the UK, the Charity Commission |
Minimum | Often none; US$5,000 to US$25,000 at the large sponsors; A$20,000 to A$50,000 for an Australian sub-fund | Practical minimum of several million for the cost to make sense; Australian private ancillary funds are commonly started at A$500,000 or more |
Control | You recommend; the sponsor decides formally and almost always agrees | Full control through your board |
Payout | None required (US); Australian public ancillary fund sub-funds distribute 4% a year | 5% of assets a year (US, with programme-related investments counting); 5% for Australian private ancillary funds; Canada's disbursement quota of 3.5% on the first C$1 million and 5% above; none required in the UK |
Privacy | Grants can be anonymous; no public filing of the donor's fund | Public filings: Form 990-PF in the US listing grants and trustees, Charity Commission accounts in the UK, ACNC annual information statement in Australia, T3010 in Canada |
Succession | Successor advisers named; some sponsors limit to one or two generations, after which the fund goes to the sponsor's general pool | The board continues; the family can hold seats for generations |
Deduction | Higher limits for cash (60% of AGI) and appreciated assets (30%) in the US; full market value for appreciated securities | Lower limits (30% and 20%) in the US; a 1.39% excise tax on net investment income; appreciated non-listed assets deductible only at cost |
Running cost | 0.5% to 1% a year, less at scale | Two to four percent of assets a year below US$10 million; less at scale; staff, audit, legal, investment management |
What it teaches | Giving, simply | Governance, investment, grant-making: a training ground |
By country
United States: the classic comparison above; DAFs held about US$250 billion by 2024 and made grants of about US$55 billion, and the largest sponsor, Fidelity Charitable, is now the largest grant-maker in the country. United Kingdom: a CAF Charitable Trust, an NPT UK or Prism account plays the DAF role, with Gift Aid on the way in; a registered charitable trust or charitable incorporated organisation plays the foundation role, with Charity Commission registration above £5,000 of income, trustees' annual reports and public accounts. Canada: funds at community foundations and bank-sponsored programmes against a private foundation with its disbursement quota, its T3010 return and the rules against non-arm's-length dealings that trip up families who lend to their own foundation. Australia: a sub-fund of a public ancillary fund (4% minimum distribution, no set-up cost, the fund handles compliance) against a private ancillary fund (5% minimum, a corporate trustee with at least one independent director, an annual audit above A$1 million, registration with the ACNC); both give the immediate deduction and both must give only to deductible-gift recipients, which rules out most overseas causes.
Which fits which family?
A family starting out, or giving less than a few million, wants the fund. A family that wants a name on the door, control of the investments, staff, and a place to put the next generation to work wants the foundation and should budget for the cost. Many families run both: the foundation for the strategy, a fund for the quick, quiet gifts, and a fund inside the foundation's country of giving for the causes the foundation cannot reach. A family that wants a foundation but not yet should open a fund now, take the deduction in the high-income year, and move the assets later.
The succession question, which is the real one
A donor-advised fund names successor advisers, and at most sponsors the line ends after one or two generations. A foundation has a board, and the board can be family forever. Neither carries the donor's reasons; the fund's successor gets a login, the foundation's board gets the deed. The families whose giving survives are the ones where the second generation heard the first explain why, and the explanation was recorded, because the board meeting in 2060 will not have anyone at it who did.
Frequently asked
Is a donor-advised fund cheaper than a foundation?+
Yes, by a wide margin: no lawyers, filings, board or staff, and fees of about 0.5% to 1% a year.
Can a donor-advised fund be passed to my children?+
Usually, by naming successor advisers; some sponsors limit how many generations before the fund passes to their general pool.
Does a private foundation have to give money away each year?+
In the United States 5% of assets; Australia's private ancillary funds 5%; Canada's quota is 3.5% to 5%; the UK sets no minimum.
Can I give to overseas charities through either?+
Through a US DAF or foundation, yes with due diligence; through an Australian ancillary fund only to registered deductible-gift recipients, which rules most out; through a Singapore family office, via the Philanthropy Tax Incentive Scheme.
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