Conversation tips for Advisors: Deductions beyond a private foundation

Are there other solutions for me to maximize my deductions beyond what a private foundation can provide?

Your clients can give with a national donor-advised fund like the Fidelity Charitable Giving Account in addition to their private foundation—it's not an either/or decision. Clients can also consider collapsing their private foundation and establishing a Giving Account.

Complement a Private Foundation

If a client wants to donate non-publicly traded assets, a donor-advised fund can be a great complement to their private foundation. Generally, when a client donates these assets to a public charity with a donor-advised fund program, they’re able to take a tax deduction for the full market value of the donated asset* and potentially eliminate capital gains taxes. Typically these contributions made to a private foundation are only deductible at the lesser of fair market value or basis.

Collapse a Private Foundation

Different factors could lead to wanting to collapse a private foundation, ranging from the death of the original founder to a need for greater privacy in charitable affairs to a desire to reduce costs and complexity. A popular solution is to dissolve the foundation and distribute its assets to a public charity, such as a donor-advised account at Fidelity Charitable. This strategy provides a way for individuals to meet their philanthropic goals, possibly achieve even greater tax benefits, and continue to support charities during their lifetime and beyond.

Conversation Tips

Tip #1

Inform your client about the tax benefits of using both donor-advised funds and private foundations. Donating assets to a donor-advised fund provides a potential immediate tax deduction—up to 60% of adjusted gross income for cash gifts and 30% for long-term appreciated publicly traded assets, as compared to 30% and 20% limits, respectively, for gifts to private foundations.

Tip #2

Ask clients about the administrative tasks associated with a private foundation.

• Are they becoming burdensome or is there a desire for simplicity?
• Is there a desire for anonymity? Donor-advised funds allow for anonymous grants.

Tip #3

Look at their portfolio. Is there a non-publicly traded asset or appreciated security that they would want to contribute? If so, it may be most beneficial to complement their current charitable vehicle with a donor-advised fund—so they give more to charity while minimizing tax implications.

*As determined with a qualified, independent appraisal.