What are the Differences Between Donor-Advised Funds and Endowments?

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When considering philanthropic strategies, two common options for long-term giving are Donor-Advised Funds (DAFs) and Endowments.

Each of these options has distinct features, benefits, and implications for donors and the causes they support. The chart below provides a side-by-side comparison of DAFs and Endowments, highlighting their structure, tax advantages, management flexibility, and impact on charitable organizations.

Understanding these differences can help donors choose the most effective approach to align their giving with their values and financial goals.

DONOR-ADVISED FUNDS	ENDOWMENTS
A flexible charitable giving tool	Uses and distributions driven by a legal agreement
Allows flexible distributions up to the full balance of the fund, if desired	Created to keep the original gift and any additions intact with a set percentage distributed from the fund each year
Allows grants to be made to multiple organizations based on your goals and timeline	Beneficiaries are set at the time of the agreement with the ability to modify during the donor’s life
Additions of cash and non-cash can be made at any time with no requirement regarding when to make a grant	Additions of cash and non-cash can be made at any time but will follow the original agreement for distribution purposes
No required annual distribution	The purpose is to pay out to beneficiaries in perpetuity
Donor-advisor can select an individual(s) as a successor advisor, which allows the management of the fund to be handed down to the next generation	Donors can set up the fund and leave it alone if desired
Used for short-term or long-term philanthropic goals	Long-term giving solution
Investments made depending on expected giving timeline	Invested to meet an annual distribution plus growth

In Summary

A Donor-Advised Fund (DAF) is a flexible charitable giving fund that allows you to impact causes most important to you. A donor starts by making an irrevocable gift to a sponsoring organization (in this case Provision) and receives a charitable deduction for that gift. Those funds can grow tax-free with grants being distributed upon the donor’s recommendation at any point. Provision takes on the administrative obligation of making the grants upon request. DAFs are easy to use and allow for simplified tax reporting with receipts all in one place from the sponsoring organization each time a contribution is made to the DAF. A DAF can be opened with a contribution starting at $1,000.

An Endowment is meant to provide long-term stable support to a ministry or charity. A donor can make an irrevocable gift to an endowment, receive a tax deduction for the gift, and allow those funds to support an organization in perpetuity. At the initial setup of the fund, a donor selects one or more organizations to receive set distributions all while allowing the corpus to stay intact. Designations may be made during the donor’s lifetime, but all distributions are directed based on the legal agreement.  

Click here to learn more about Provision's Donor-Advised Funds or contact a member of our team today!

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