Community Foundation Alternatives to Private Foundations
If you or your client are thinking about establishing a private foundation but are looking for a simpler, more cost-efficient alternative, Iowa community foundations can help you analyze the pros and cons of creating a private foundation or a donor-advised fund through your local community foundation.
A private foundation allows extensive donor control over distributions, board selection and investment management. However, private foundations are highly controlled by the IRS with many special restrictions and regulations, including administrative and reporting burdens, excise taxes and a required minimum payout. Below are some alternative funds a donor may consider establishing at a local community foundation to accomplish similar goals.
Donor-advised funds are convenient, flexible tools for individuals, families, businesses, or groups that want to be personally involved in recommending grant awards made possible by their gifts. Companies looking for an easier, more effective way to give back to the community can establish a Donor-Advised Fund and a team of employees can meet regularly to review local needs and recommend grants. Donor-Advised Funds are typically less costly and easier to administer than other forms of philanthropic giving such as family or corporate foundations. The donor or other named advisors can recommend grants to 501(c)3 nonprofits. Grants are made in the fund’s name. The donor (if established by individuals) also has the right to name successor advisors to the fund who can recommend grants in the fund’s name after the death of the original donors.
Here is a downloadable and printable PDF Comparing Approaches to Giving, including private foundations and these community foundation alternatives.
Can A Private Foundation Be Converted?
Some of your clients may have an existing private foundation. In this case, they may find that there are several advantages to transferring it to an advised fund with their local community foundation. Through a simple transfer process, your client may be able to avoid some of the hassles (and costs) of private foundation management.
Contact your local community foundation for more specific information or assistance.