A Comparison of Donor Advised Funds and Public Foundations

Both businesses and individuals have a wide variety of financial vehicles from which to choose for their charitable giving and donations. Two of the most common such vehicles are donor advised funds and public foundations.

Public Foundations

Public foundations exist to promote causes which they deem to be in the public interest. Public foundations receive funds from the general public to support these causes, which may be religious, charitable, educational, etc. They may receive private donations from an individual or from a firm, but those donations cannot exceed fifty percent of their capital. Public foundations use their resources to perform the services they support directly. Legally, an organization can only be classified as a public foundation if it meets the criteria specified under IRS section 509(a) and annually files form 990.

Donor Advised Funds

Donor advised funds, on the other hand, are accounts managed by a charity for the purpose of taking donations. They are an alternative to direct giving with a number of unique benefits. For instance, a donor advised fund can be created quickly and individuals can start donating to it immediately. These accounts can accept gifts of both cash (of which 50 percent of the adjusted gross income is tax deductible) and stock (of which 30 percent of the adjusted gross income is tax deductible). In short, these accounts allow an individual or group greater control over the money they give to an organization, while still providing a relatively flexible, fluid means of donating to a charitable cause.

FEX has operated donor advised funds since its creation in 1979. Since then, over 10,000 different grassroots organizations have benefited from these funds – a perfect example of the good they are designed to accomplish.