Donor-Advised Funds vs. Private Family Foundations

February 19, 2026

By Sherry Beames, Donor Services Coordinator

Whether a client is considering establishing a private foundation or is currently managing one, donor-advised funds (DAFs) can offer meaningful advantages. For many donors, a DAF delivers the core benefits of a private foundation — strategic philanthropy, family engagement, and long-term impact — without the administrative burden, cost, and regulatory complexity.

Donor-advised funds operate much like private foundations, but with significantly less paperwork and oversight required of the donor. Contributions to a DAF can be made at any time, including through bequests or other planned gifts. When managed in partnership with La Crosse Area Community Foundation, DAFs provide a powerful, flexible, and efficient charitable giving solution for your clients.

Why Consider a Donor-Advised Fund?

DAFs at the Community Foundation offer several advantages that resonate with both donors and their professional advisors:

• Local expertise: LACF brings deep knowledge of community needs and nonprofit effectiveness, helping clients align charitable dollars with their philanthropic goals.
• Simple and efficient setup: Establishing a DAF is quick and straightforward, with a minimum initial contribution of $10,000.
• Administrative ease: LACF manages all paperwork, recordkeeping, tax receipting, donor-recommended grantmaking, and payment processing.
• Privacy options: Donors may choose to be publicly recognized for their giving or remain anonymous.
• Professional investment oversight: Assets are invested through portfolios managed in partnership with Trust Point and overseen by LACF’s finance committee.
• Family engagement: Donors can involve children and relatives in grantmaking decisions, helping instill charitable values and preserve a family tradition of giving.

DAFs vs. Private Foundations: Key Differences

Establishment and Administration

A donor-advised fund can be established immediately, allowing clients to act quickly when a charitable opportunity or tax-planning need arises. In contrast, creating a private foundation may take months and often requires significant legal, accounting, and administrative expenses.

Once a DAF is established, LACF handles all ongoing administrative responsibilities, including investment management, compliance, and grant administration — allowing donors to focus on philanthropic impact rather than operational demands.

• Private foundations, by comparison, require:
• Legal formation and Internal Revenue Service recognition
• Ongoing compliance with federal and state regulations
• A governing board of directors
• Regular board meetings with recorded minutes
• Annual tax filings and public disclosure

Many foundations also require outside advisors or paid staff to manage these obligations.

Tax Efficiency

DAFs provide donors with the maximum charitable tax benefits allowed by law:

• Immediate income tax deduction in the year of contribution
• Deduction limits of up to 60% of adjusted gross income for cash contributions and up to 30% of AGI for appreciated assets; however, under the One Big Beautiful Bill Act, itemized charitable deductions are allowed only to the extent total annual contributions exceed 0.5% of the donor’s (AGI).

Private foundations are subject to lower deduction limits — generally 20% to 30% of AGI, depending on asset type.

In addition, contributions to DAFs typically receive a fair market value deduction, even for appreciated non-cash assets. Certain gifts to private foundations, such as real estate, may be limited to a cost-basis deduction. DAFs are also not subject to excise taxes on net investment income and can help donors avoid capital gains tax on appreciated assets.

As always, individual tax circumstances vary, and advisors play a critical role in determining the most appropriate charitable vehicle for each client.

Investment Management and Control

Assets contributed to a DAF legally belong to the community foundation, which assumes fiduciary responsibility for managing and investing those funds. While this structure provides less direct control than a private foundation, it significantly reduces risk and administrative responsibility for the donor.

LACF offers donors a choice of two investment pools, both professionally managed and guided by a knowledgeable finance committee. This approach provides prudent oversight while supporting long-term charitable growth.

LACF provides the option for individually managed accounts. Please contact LACF for more information.

Transitioning from a Private Foundation

For clients who already operate a private foundation, transferring assets to a donor-advised fund at LACF may be an attractive option. Through a relatively simple transfer process, donors can reduce administrative costs, eliminate compliance burdens, and continue their philanthropic mission in a more streamlined structure.

When a Private Foundation Still Makes Sense

While donor-advised funds are an excellent solution for many donors, there are situations where a private foundation may remain the more appropriate choice. Advisors should consider a private foundation when clients have the following objectives:

• Desire for maximum control: Clients who want full legal authority over investments, grantmaking criteria, and charitable strategy may prefer a private foundation structure.
• Direct charitable activities: Foundations can operate their own programs, make grants to individuals (such as scholarships), and engage in certain international or nontraditional charitable activities that are not permitted through DAFs.
• Large-scale, long-term philanthropy: For families committing substantial assets — often several million dollars or more — to a single charitable mission, a foundation can serve as a centralized, enduring philanthropic vehicle.
• Formal family governance and employment: Private foundations allow for structured board participation, family governance, and the ability to employ family members or staff (subject to reasonable compensation rules).
• Public legacy and visibility: Some donors value the transparency and recognition that come with a named foundation and public reporting.

In these cases, the added cost and administrative responsibility of a private foundation may be justified by the level of control, flexibility, and legacy-building it provides.

Advisor Takeaway

For many individuals and families, donor-advised funds represent a more cost-effective, tax-efficient, and flexible approach to charitable giving than the resource-intensive structure of a private foundation. Advisors who understand both vehicles are well positioned to help clients balance tax planning, governance preferences, and philanthropic intent.

For more than 90 years, the La Crosse Area Community Foundation has safeguarded and strengthened our community. With deep local expertise, leadership in nonprofit collaboration, and a commitment to building a lasting culture of philanthropy, LACF stands ready to help your clients realize their charitable vision and maximize their impact.