5 Reasons Your Client with a Private Foundation Might Benefit from a Donor Advised Fund

At The Minneapolis Foundation, I’m proud to be part of a team with a 100-year track record of helping generous people support the causes they care about. My colleagues and I are experienced at working with individuals, families, and businesses to establish Donor Advised Funds and other charitable vehicles that help them achieve the positive impact they want to have in the community.

Jenny Johnson

Jenny Johnson

Some donors team up with The Minneapolis Foundation when they’re just getting started with their charitable giving, but many already have a long track record as philanthropists. In particular, you might be surprised at the number of people who already have a private foundation when they come to the Foundation. There are lots of good reasons that charitable people make the decision to establish a Donor Advised Fund instead of (or in addition to!) a private foundation.

If you have clients with a private foundation, here are five signs that they might benefit from a Donor Advised Fund:

  1. They’re ready for hassle-free philanthropy. Here’s a little secret that many people learn only after they’ve started a private foundation: it can be a LOT of work. Between filing 990-PFs, processing grants, and fielding what can seem like an endless string of funding requests, running a private foundation can make even people with big dreams and lots of energy feel like they spend more time pushing paper than changing lives. Many of the donors I work with at The Minneapolis Foundation came to us because they no longer wanted the burden of filing tax forms and knew they could trust us with the other administrative headaches that kept them from experiencing the joys of philanthropy. By providing stellar back-office and grantmaking due-diligence services, we can give your clients the freedom to focus on what matters most: Making a positive difference in the community.
  2. They’re going through a transition. I work with some families who decided to establish a Donor Advised Fund after successfully running a private foundation for many years. Then something changed: Maybe a long-time staff member retired. Maybe the parents got older, and their kids didn’t have time to take on day-to-day management of the foundation. Even if they’re seasoned philanthropists, your clients may get to a point where it makes sense to craft a long-term succession plan with a bedrock community partner like The Minneapolis Foundation.
  3. They’re having trouble meeting the IRS’s minimum payout requirement. Occasionally, private foundations struggle to distribute the 5% that tax authorities require they spend each year on charitable purposes. This can happen for a number of reasons, from management challenges to disagreements within a family about which causes to support. Establishing a Donor Advised Fund to accept some or all of the assets from a private foundation can help, giving your clients time and space to sort out the issues and, ultimately, make more impactful decisions about where those charitable dollars should go.
  4. They want to give anonymously. This is a common motivator for people who open Donor Advised Funds to complement the giving they do through a private foundation. Suppose, for example, that you have a client with a private foundation that has a long track record of funding one issue, such as the arts. Occasionally, your client may want to support a completely unrelated cause (a homeless shelter, a civil liberties group, their religious institution, etc.) but doesn’t want that contribution to be associated with the private foundation. In situations like this, Donor Advised Funds can be a very useful tool.
  5. They want to be part of a larger philanthropic community. In addition to providing convenient, tax-wise management of charitable assets, The Minneapolis Foundation offers our donors a wealth of community connections and resources. We host events where they can meet experts on the issues they care about, services such as the Family Philanthropy Resource Center to help them with multigenerational and values-driven philanthropy, and opportunities to engage in cutting-edge charitable strategies such as impact investing. If you have a client who feels isolated running a private foundation or hungers for greater access to information about emerging trends or issues, establishing a Donor Advised Fund at a community foundation can be a breath of fresh air.

Do you have clients who fit any of these descriptions? Call me today at 612-672-3849 to discuss how we can best partner to support your clients’ needs.