Charitable vehicles comparison

Donor-advised fund or private foundation

Creating a successful charitable giving plan begins with understanding the differences between various charitable vehicles. Here we compare two frequently employed charitable planning vehicles — the donor-advised fund (DAF) and private foundation to help you structure and plan your giving. For more detailed information about these solutions, please contact your advisor.

Donor-advised fund	Private foundation
Maximum tax deductibility as a percentage of Adjusted Gross Income (excess may be carried over five years)
Cash: 60%¹ Publicly traded securities: 30% Nonfinancial assets: 30%	Cash: 30% Publicly traded securities: 20% Nonfinancial assets: 20%
Valuation of gifts for deduction
Fair market value²	Fair market value for publicly traded securities; cost basis for non-publicly traded securities or nonfinancial assets²
Grantmaking
Donor makes grant recommendations, which are restricted to US-based public charities or their equivalents	Donor has full control over and responsibility for grantmaking decisions in accordance with IRS regulations applicable to private foundations
Investments
Donor can choose investment management as allowed by the DAF sponsor's guidelines	Donor manages investments directly in accordance with IRS regulations applicable to private foundations
Privacy
Donor has discretion to grant anonymously	Grant activity is a matter of public record
Excise tax on net investment income³
None	1.39% of net investment income annually
Required quarterly tax payments
No	Yes
Required annual distribution
None	Yes, 5% of net asset value annually
Donor IRS filing requirement
No	Must file tax return (IRS Form 990-PF)
Legal fees/start-up costs
No	Yes, required to establish foundation

Our offerings

Note: An increasing number of philanthropic individuals and families utilize both donor-advised funds and private foundations in a comprehensive charitable giving strategy.

Donor-advised fund offering: The Bank of America Charitable Gift Fund

Client type: May be ideal for emerging and experienced philanthropists — self-directed donors who desire privacy, administrative simplicity and maximum charitable impact

Tax preparation: Gift receipt provided for assets contributed

Administration: Provided by donor-advised fund

Account minimums:

Initial contribution: $25,000
Minimum grant: $250
No ongoing minimum balance is required

Assets accepted:

Cash
Securities and mutual funds
Restricted stock and closely held business interests⁴
Hedge funds and private equity interest⁴
Real estate, timberland, farms and ranches⁴
Gas, oil and mineral rights⁴
Other complex assets⁴
Certain other nonfinancial tangible assets⁴

Support from grantmaking professionals: Comprehensive support available, based on account size, including strategic planning, grantmaking, mission development and family governance⁵

Family involvement: Unlimited advisors - clients may name co-Advisors and Successor Advisors to share in account privileges

Succession: Unlimited

Private foundation offering: Foundation management services⁶

Client type: May be ideal for philanthropists who prioritize flexibility and control

Tax preparation: Available to foundations provided our firm manages all assets

Administration: Broad range of administrative services available

Account minimums: Greater than $5 million is recommended, with no strict minimums

Assets accepted:

Cash
Securities and mutual funds
Crypto Currency⁴
Restricted stock and closely held business interests⁴
Hedge funds and private equity interest⁴
Real estate, timberland, farms and ranches⁴
Gas, oil and mineral rights⁴
Certain other nonfinancial, tangible assets⁴

Support from grantmaking professionals: Comprehensive support including strategic planning, grantmaking and administrative services, mission development, governance and compliance⁵

Family involvement: Family members and other trusted advisors may be involved in roles such as trustee, director or advisor

Succession: Unlimited

¹ This limitation was increased from 50% to 60% for years 2018 through 2025, if all gifts are made in cash. It is scheduled to “sunset” and return to 50% in 2026. The limit was further increased to 100% for 2020 and 2021, and the ordering rules clarified so that not all gifts must be made in cash, that is, lower percentage category gifts may be made first, with cash gifts made on top to reach 100%.

² Fair market value deductions generally subject to one-year holding period.

³ Income received from investment assets (before taxes) such as bonds, stocks, mutual funds, loans and other investments (less related expenses). For tax years beginning on or before Dec. 20, 2019, the excise tax is 2 percent of net investment income, but is reduced to 1 percent in certain cases. For tax years beginning after Dec. 20, 2019, the excise tax is 1.39% of net investment income, and there is no reduced 1 percent tax rate.

⁴ Please note: additional fees may apply to some of these services.

⁵ Considered on a case-by-case basis.

⁶ Custom philanthropic strategy services are available for giving vehicle accounts > $10MM and/or households with investment assets > $25MM.

Donor-advised fund and private foundation management are provided by Bank of America Private Bank, a division of Bank of America N.A., Member FDIC and a wholly owned subsidiary of Bank of America Corporation.

Institutional Investments & Philanthropic Solutions (also referred to as “Philanthropic Solutions” or “II&PS”) is part of Bank of America Private Bank, a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). Trust, fiduciary, and investment management services are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A. and its agents.