Donor advised funds are often promoted by making comparisons to private foundations. In some ways donor advised funds are very similar to private foundations, but there are key practical distinctions. It is helpful for philanthropists to understand the differences between the two structures.
One of the major advantages of a donor advised fund is the administrative support provided to the philanthropist. At Aqueduct Foundation, this support has a variety of dimensions.
A donor advised fund can be understood as a “private foundation” hosted by a public foundation, which is a pre-existing registered charity. The advantage is the administrative infrastructure for the foundation already exists. Basic functions such as tax receipting, donation handling, record keeping, investments, reporting, and granting systems are provided by host foundation from inception.
Governance and regulatory compliance is also provided by Aqueduct Foundation. These activities are time consuming and may detract from granting and charity engagement. For example, depending on the structure of a private foundation, an annual audit and annual general meeting are required. In addition, annual regulatory filings such as the T3010 to Canada Revenue Agency and corporate return are needed. As any private foundation dealing with the new Federal Not-for-Profit Corporations Act in advance of the October 2014 deadline can attest, administrative tasks can be distracting.
Family succession is another major issue for philanthropists. With legacy funds, which are established today and funded through an estate donation, there may not be family to carry on the donor’s foundation. Some philanthropists don’t have children or don’t wish to have a successor who will change the mission of their foundation. Other donors value future family involvement in their foundation, but don’t wish to burden their children and grandchildren with administration.
In the case of Aqueduct Foundation, these services are provided for a single annual “expense recovery allocation”, which is inclusive of all services and tiered based on asset value. There is a peace of mind in knowing your foundation is fully compliant and well-supported.
Malcolm D. Burrows
Toronto 1-866-216-2116 Vancouver 1-888-723-1122 firstname.lastname@example.org