The Philanthropy Matrix: DAF vs. Private Foundation
The Philanthropy Matrix: DAF vs. Private Foundation
Operationalizing your good deeds: Choosing between the speed and anonymity of a DAF versus the control and prestige of a Foundation.
Executive Summary
- Donor Advised Fund (DAF): The “Charitable Checking Account.” You donate assets now, get an immediate tax deduction, and decide which charities to support later. Low cost, high privacy.
- Private Foundation (PF): A standalone legal entity. It offers complete control (hiring family members, running own programs), but comes with high administrative costs, public disclosure, and a mandatory 5% annual payout.
- The Deduction Gap: DAFs allow higher tax deductions (up to 60% of AGI for cash) compared to Private Foundations (typically 30% of AGI).
The “Self-Dealing” Trap
Private Foundations are strictly prohibited from “Self-Dealing.” You cannot use foundation funds to buy gala tickets for yourself, rent office space from a family member, or provide personal loans. The IRS penalties are severe.
Mechanic: Structural Choice
Immediate
Deduction Timing
5%
PF Payout Rule
Privacy
DAF Benefit
Control
PF Benefit
Simulation: Cost & Efficiency ($10M Endowment)
Administrative Burden vs. Impact
| Feature | Donor Advised Fund (DAF) | Private Foundation (PF) |
|---|---|---|
| Setup Time | Instant (1 Day) | Slow (Months/IRS Approval) |
| Privacy | Total Anonymity | Public (Form 990-PF) |
| Deduction (Stock) | Fair Market Value (FMV) | Basis only (if closely held) |
“If you want to give efficiently and quietly, use a DAF. If you want to build a dynasty, hire family, and run programs, build a Foundation.”
Essential Resources
INTERNAL
BMT Playbooks