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PERSONAL FINANCIAL PLANNING

The third and final factor: DAF and a private foundation include
The family’s ability and setup costs and ongoing management
willingness to participate in In the supporting and compliance fees, income tax chari-
the proper administration of organization, the table deduction contribution base differ-
the philanthropic endeavor donor surrenders entials, and the desirability of employing
One of the big practical problems in and compensating family members in
administration of a private foundation effective control over the philanthropic endeavor.
is recruiting and supervising people to the operations of The choice of charitable vehicle can
do administration and governance. It is be complex, and, as discussed here, that
not unusual for the senior generation of the charitable entity choice depends on careful analysis of
and the flexibility
a family to set up a private foundation many factors. ■
because they have a passion for philan- of changing the
thropy — usually a particular cause —
charitable beneficiary
but their successors may have different
time management priorities or vastly or beneficiaries.
different philanthropic interests. Contributors
It is also not unusual for a wealthy
Theodore J. Sarenski, CPA/PFS, CFP,
couple to set up a private foundation for
is a wealth manager at Capital One/
their children to assist in running, for dissolving under applicable state law
United Income in Syracuse, N.Y. Mr.
the purpose of teaching their children and distributing the private foundation’s
Sarenski is chairman of the AICPA
philanthropy and how to get along. assets to one or more charitable organi-
Advanced Personal Financial Planning
However, these well-intentioned efforts zation recipients. Obviously, with a DAF
Conference. He is also a past chairman
often do not work out long term, for a account, the donor and his or her family
of the AICPA Personal Financial Plan-
host of reasons. Some families do not have to rid themselves of all manage-
ning Executive Committee and a former
have the interest or ability to manage ment, administrative, investment, and
member of the Tax Literacy Commis-
and run a private foundation. Just as compliance responsibilities and must
sion. L. Paul Hood Jr., J.D., LL.M.,
likely, the children will clash in their make recommendations to the DAF
CFRE, FCEP, owns Paul Hood Services
favored causes, such that the family sponsor for grants, which takes far less
in Sylvania, Ohio, and is the author of
private foundation is divided and each time. Moreover, the family can name a
Buy-Sell Agreements: The Last Will &
child ends up with his or her own pri- DAF account, and most DAF sponsors
Testament for Your Business. For more
vate foundation. today are very flexible and allow virtually
information about this column, contact
For the reasons discussed above, a perpetual successor advisory rights.
thetaxadviser@aicpa.org.
private foundation is often converted Additional more granular consider-
to a DAF account instead of formally ations in making the decision between a
AICPA RESOURCES
PFP credential Publications (free access for PFP Section members)
Personal Financial Specialist Experienced CPA Pathway Guide to Social Security Planning
Videos from the PFP Learning Library Webcast Archive Guide to Retirement & Elder Planning: Healthcare Coverage
Planning
“Estimating the End of Retirement”

“Financial Independence: Rethinking Retirement”
For more information or to make a purchase, visit
“Social Security and Medicare: Maximizing Retirement Benefits” aicpa.org/cpe-learning or call the Institute at 888-777-7077.

40 June 2022 The Tax Adviser