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If you are involved in a private foundation, and have found that the time and costs involved are greater than you expected, you might consider terminating your private foundation by transferring a portion or all of the assets to a Donor Advised Fund.

Administrative paperwork, expense, research on charitable organizations, and ongoing legal and financial due diligence are only some of the factors to consider when maintaining a private foundation. For the founder or family members, the work can be drudgery.

Over time, private foundations often struggle with the following issues:

  • The original purpose of the foundation no longer has the urgency it once did.
  • Financial and administrative factors make it difficult for the foundation to operate effectively.
  • The original founder may be slowing down, and the children or grandchildren may not share his/her passion.
  • Busy schedules and geographic distance make it increasingly difficult to provide the administrative attention.
  • The founder desires that his or her children focus on the fun –the family’s philanthropy, not on the foundation administration.

These considerations, along with the increased recognition of advantages of Donor Advised Fund as a family foundation alternative, have prompted families to terminate their private foundations and transfer assets to Donor Advised Funds at Independent Gift Fund.

Independent Gift Fund is a simple and effective alternative:

Active Role for the Donor
Independent Gift Fund Donor Advised Funds offer you uniquely flexible ways to manage your giving. The Fund provides you and your family with a tax-wise way to support charities on a flexible timetable and build a lasting legacy generations to come.

Lower Ongoing Costs
The cost to maintain your Donor Advised Fund is low (1% or less of Fund balance)

Contribution Flexibility
Independent Gift Fund can accept and hold a wide variety of asset types. 

Better Tax Benefits 
In a Donor Advised Fund, contributions of cash to the organization are deductible at the full market value (subject to AGI limitations) rather than the limited rate for a private foundation. For contributions of publicly-traded or closely-held stock, the deduction is at the full fair market value rather than the donor’s cost basis for a private foundation. see Tax Benefits

Low Administrative Burden
In contrast, donors to Donor Advised Funds have far fewer responsibilities. Record keeping is greatly simplified. Independent Gift Fund assumes all backoffice tasks, such as compliance monitoring, state and federal filings, verifying each grantee’s tax-exempt status, and grant disbursements in accordance with IRS guidelines. see Comparison

No Excise Taxes
The annual excise tax that a private foundation pays on the net investment income is eliminated.

Flexible and Simple Grant-making Options
Much like a private foundation, families can set up their Donor Advised Fund to reflect their family’s name and values, and recommend grants from their Fund to a wide range of charities across the US.

No Payout Requirement
Donor Advised Funds do not have the annual 5% minimum payout in grants distributions.

Privacy
A Donor Advised Fund at Independent Gift Fund provides donors flexible solutions in maintaining privacy. In comparison, private foundations offer little privacy and no anonymity. With a private foundation, all contributions and distributions are public record.

  • Contribution privacy.
  • Investment privacy.
  • Administration privacy.
  • Grant-making privacy and grant-making anonymity.

Investment Management
Assets in an Independent Gift Fund Donor Advised Fund can be invested with open architecture. see Investments

Independent Gift Fund gives donors the ability to maintain a relationship with an existing financial advisor. That advisor can provide the Fund an investment approach that is customized and individually managed in a segregated account. Independent Gift Fund does not pool investments with other Foundation funds.

The Mechanics of Terminating a Private Foundation 

Section 507 of the Internal Revenue Code permits termination of a private foundation in either trust or corporate form and the distribution of its assets to a public charity. A private foundation can simply transfer its assets to a Donor Advised Fund at Independent Gift Fund and file the final 990-PF to the IRS afterwards. Independent Gift Fund qualifies as a public charity into which a private foundation may distribute all or part of its assets. A transfer of all assets not only releases the private foundation from the reporting requirements of the Code, but also terminates the payment of the excise tax imposed on private foundations. State law may require additional steps to terminate the foundation’s legal existence as a nonprofit corporation or charitable trust. Creating a Donor Advised Fund at Independent Gift Fund can be accomplished by completing a simple application.

Some transfer their assets in a lump sum; others start with a smaller portion, and then add to their Fund over time.

Foundations considering a transfer should get help from an attorney with experience in handling this kind of transaction.