When my clients want to make a charitable gift that will be given to charity in future years, there are two primary vehicles for managing the funds. One choice is a donor advised fund, which can be established at the Community Foundation of Middle Tennessee, the Jewish Federation of Nashville, or various other organizations. The advantages of a donor advised fund are summarized at the bottom of the attached link to the website of the Community Foundation of Middle Tennessee.

The potential benefits of a private foundation are discussed in the attached paper from the Foundation Source.

I have worked with numerous donor advised funds and private foundations and they both serve a useful purpose. Whether a private foundation or donor advised fund is right for you depends upon a number of factors. As a general rule, I encourage clients who are setting aside less than $1 million to use a donor advised fund.

Do you have a clear vision of your foundation’s future? Do you know the charities you want your foundation to support? How long do you want your foundation to last? Who will make decisions regarding grants from your foundation after your death or incapacity?

I have been surprised that these questions have not yet been answered by a lot of my clients who have already funded a family foundation and/or plan to make substantial contributions to their foundation upon their death. As to lifespan, a recent study by the Foundation Center concluded that 63% of family foundations plan to last into perpetuity, 12% plan to have a limited lifespan, and 25% are undecided about their lifespan. It has been my experience that the undecided group is higher than 25%.

Setting up and funding your foundation is the most difficult step. Establishing rules for the management of your foundation should be the easy part. You owe it to yourself, your family, and your favorite charities to make sure that there are definitive guidelines for the management of your charitable legacy. 

Link to Perpetuity or Limited Lifespan: How Do Family Foundations Decide?