Ways to give: donor-advised funds vs. private foundations
When it comes to giving with intention, many individuals and families find themselves deciding between two main charitable vehicles: donor-advised funds (DAFs) and private foundations. Both make it possible to support the causes you care about while receiving valuable tax benefits, but they differ in cost, structure, and control.
This guide breaks down how each option works, what they mean for your philanthropic goals, and how GoFundMe Giving Funds makes donor-advised giving more accessible and human-focused than ever.
What is a private foundation?
A private foundation is a nonprofit legal entity created and funded by a single source, usually a family, corporation, or individual donor. Many family foundations are started to turn giving into something long-term, even lasting in perpetuity.
Private foundations are usually classified into two types:
- Non-operating foundations: They don’t run their own programs. Instead, they make grants to other charitable organizations.
- Operating foundations: Run their own charitable initiatives such as museums, educational programs, or research projects.
Benefits of private foundations
- Control and independence: Founders maintain full authority over the foundation’s board of directors, operations, investment management, and grant decisions.
- Legacy planning: Families can involve future generations in philanthropy, encouraging shared values and long-term charitable goals.
- Visibility and influence: Foundations can build a public identity, allowing philanthropists to champion causes that align with their mission.
For philanthropists who want structure, recognition, and full authority, foundations can be the right fit.
Considerations and trade-offs
Foundations require more than generosity; they require upkeep.
- Administrative work: Running a foundation means tax filings, recordkeeping, and due diligence for every grant. You’ll also need to file IRS Form 990-PF each year for transparency.
- Start-up and legal fees: Foundations can cost hundreds of thousands of dollars to establish, once you factor in legal fees, staffing, and the board of directors.
- IRS oversight: Each year, foundations must donate at least 5% of their assets to meet the distribution requirement and qualify as tax-exempt, and they pay a 1.39% excise tax on net investment income.
Because of these requirements, foundations are often better suited for donors with substantial capital, specific giving strategies, or complex investment options such as real estate, mutual funds, or publicly traded securities.
DAFs vs. private foundations: A side-by-side comparison
| Feature | Donor-Advised Fund | Private Foundation |
| Setup time | Minutes | Months (legal setup, IRS filing) |
| Start-up cost | Typically $0–$5,000 | $250,000+ recommended |
| Tax deduction limits | Up to 60% of AGI (cash) or 30% for appreciated assets | 30% of AGI (cash); 20% for appreciated assets |
| Excise taxes | None | 1.39% on net investment income |
| Minimum annual payout | None required | 5% annual payout minimum |
| Grant flexibility | Recommend grants to any IRS-qualified public charity | Full discretion (within IRS charitable rules) |
| Administrative responsibility | Minimal, managed by the sponsoring organization | High, requires legal and accounting staff |
| Privacy | Option to give anonymously | Public disclosure via IRS Form 990-PF |
How donor-advised funds and foundations can work together
Though DAFs and private foundations serve similar charitable purposes, the IRS limits how they can interact.
Can a DAF give to a private foundation?
Generally, no. Donor-advised funds can only support public charities that meet IRS qualifications. Since most private foundations are not classified as public charities, they typically don’t qualify. However, an exception exists: a DAF can give to an operating foundation if the DAF sponsor determines that the grant meets charitable requirements through proper due diligence.
Can a private foundation give to a DAF?
Yes, but with restrictions. It must be a qualifying distribution for charitable purposes, and the DAF has to use those funds for a specific project. It can’t count toward the foundation’s 5% payout unless it’s immediately distributed.
If that sounds complicated, it’s because it is — which is why most donors talk to a financial advisor or tax professional before mixing the two.
Why many donors are choosing donor-advised funds
A lot of donors who once leaned toward foundations are choosing DAFs because they offer many of the same benefits, without the heavy lift.
DAFs let you:
- Give strategically: Set aside charitable gifts today and recommend grants when you’re ready.
- Reduce taxes: Receive an immediate tax deduction and avoid capital gains taxes when donating appreciated securities or other appreciated assets.
- Stay flexible: No annual payout requirement and no excise tax.
- Save time: The sponsoring organization handles compliance, recordkeeping, and tax receipts.
- Involve your family: Create shared philanthropic goals that your family members can help manage through one simple account.
For donors who want to focus on impact — not paperwork — DAFs offer a cleaner, smarter, and more personal giving vehicle.
Here’s how it typically works:
- Contribute: You make a charitable gift — cash, appreciated assets, or even real estate — to your DAF sponsor (the sponsoring organization).
- Invest: The funds can be invested for tax-free growth while you decide how to give.
- Grant: You recommend grants to IRS-qualified charities, and the sponsor handles the grantmaking and compliance.
It’s simple, flexible, and can be started in minutes instead of months.
It’s simple, flexible, and can be started in minutes instead of months.
How GoFundMe Giving Funds reimagines DAFs
Traditional sponsors like Fidelity Charitable, Schwab, and the National Philanthropic Trust mainly serve donors with large portfolios or specific investment management needs. GoFundMe Giving Funds is different. It was built for everyone; people who give regularly, not just the ultra-wealthy.
What sets GoFundMe Giving Funds apart:
- No start-up or administrative fees or minimum grant size
- One clear tax receipt for all donations
- Support for any IRS-verified nonprofit
- Optional investment management for growth
- Mobile access so you can give in real time
GoFundMe Giving Funds blends the charitable giving efficiency of a DAF with the accessibility of crowdfunding. It’s philanthropy that fits into real life.
Choosing between a donor-advised fund and a private foundation
When deciding between a DAF and a foundation, ask yourself:
- How much capital can I commit to this charitable vehicle?
- How involved do I want to be in governance and oversight?
- How important is the tax treatment of my assets to my broader charitable goals?
- Am I giving for recognition, family legacy, or immediate community impact?
With GoFundMe Giving Funds, you don’t just give—you make a direct and meaningful difference.
If you desire control, visibility, and long-term permanence, a private foundation may be the best fit. But if efficiency, flexibility, and a potential lower entry point are what you’re looking for, a donor-advised fund is the path of least resistance.
With GoFundMe Giving Funds, enjoy the best of both worlds–an amazing, seamless, and heartfelt way to give back that keeps what matters front-of-mind at all times: impact.
Give with purpose and confidence
Whether you’re starting your first charitable initiative or scaling an existing foundation, GoFundMe Giving Funds provides a new level of ease, control, and transparency.
Start your DAF today and turn generosity into something lasting.
This content is provided for educational purposes only and does not constitute tax, legal, or investment advice. Any tax-related figures or comparisons are for illustrative purposes. You should consult a qualified financial or tax advisor to evaluate your specific situation. All information is aligned with U.S. tax laws and regulations.