Starting a Foundation vs. a Donor-Advised Fund

Giving back to the neighborhood that raised you is one of the best uses of a pro career. But the structure you choose matters. A private foundation is a serious legal entity with federal rules, penalties, and public reporting. For many athletes, a simpler tool does more good for the community and creates far less risk for the player.

What a private foundation really involves

• A minimum payout every year. A private foundation generally must distribute at least 5% of the value of its investment assets each year for charitable purposes. Reasonable administrative costs can count, but you cannot just let the money sit.
• A tax on investment income. Private foundations pay a 1.39% excise tax on net investment income. A 2025 House proposal would have raised this to as much as 10% for the largest foundations, but that was dropped from the final One Big Beautiful Bill Act, so the flat 1.39% rate still applies.
• Public tax returns. Foundations file Form 990-PF every year. It is public. Anyone can see your assets, grants, board members, and what the foundation paid its officers and staff.
• Self-dealing rules. You, your family, and businesses you control are 'disqualified persons.' In general, the foundation cannot sell to, buy from, lend to, or rent from them, and it can only pay them reasonable compensation for real, necessary work. Using foundation money for personal benefits, like gala tickets for yourself or paying a personal pledge, can trigger penalty taxes on you and on managers who approved it.
• Lower deduction limits. Cash gifts to a private foundation are generally deductible up to 30% of your adjusted gross income, and appreciated stock up to 20%. Gifts to public charities, including donor-advised funds, get higher limits: generally 60% for cash and 30% for appreciated stock.

Why many athlete foundations struggle

In 2013, ESPN's Outside the Lines examined 115 charities started by high-profile athletes and found that 74% fell short of at least one accepted nonprofit standard, using guidelines from Charity Navigator, the Better Business Bureau, and the National Committee for Responsive Philanthropy. Common problems included spending too much on overhead compared with programs and having too few independent board members. Most of these were not scandals. They were well-meant charities without enough time, staff, or oversight, run by people whose full-time job was playing a sport.

The donor-advised fund: simpler for most players

A donor-advised fund (DAF) is an account at a public charity, called a sponsor. Large brokerage firms and community foundations both run them. You put in cash or appreciated stock, take the tax deduction in the year you give, and then recommend grants to charities over time. The sponsor handles the paperwork, the due diligence on grantees, and the tax reporting.

• Opening can take a day, with low minimums at many sponsors.
• Admin fees at large sponsors are often well under 1% a year.
• No private 990-PF with your name on it, and no annual 5% payout rule under current law.
• Higher deduction limits than a private foundation.
• Trade-offs: the sponsor legally controls the money once you give it, you can only recommend grants, and you cannot receive anything back, like event tickets or dinners, from grants.
• Great for a big-income year: give a large amount in the year of a signing bonus, then grant it out over many years.

2026 tax changes that affect giving

• Starting in 2026, if you itemize, only charitable gifts above 0.5% of your adjusted gross income are deductible. On $10 million of income, the first $50,000 of giving produces no deduction. Amounts cut by the floor can generally be carried forward.
• For taxpayers in the 37% bracket, the tax benefit of itemized deductions, including charity, is capped at 35 cents per dollar.
• People who do not itemize can deduct up to $1,000 ($2,000 for married couples) of cash gifts to operating charities. Gifts to donor-advised funds do not qualify for this one.
• Because of the floor, some high earners 'bunch' several years of giving into one big year, often into a DAF.

Fiscal sponsorship: run your program without starting a charity

If you want a named program, like a youth camp, a scholarship, or a back-to-school drive, an existing 501(c)(3) can act as a fiscal sponsor. Donations go to that established charity, which handles the tax filings, insurance, and accounting for your project in exchange for a fee, commonly a percentage of what is raised. You get your program and your name on it without building a nonprofit from scratch. If it grows, you can spin it into your own organization later.

Giving back without any new structure

1. 1
   Fund what already works

   The church, rec center, or mentoring program that helped you probably knows exactly what it needs. Ask them, and ask to see their budget.

2. 2
   Endow a scholarship

   A school or community foundation can set up a named scholarship and handle selection and reporting.

3. 3
   Give your time and name

   A free camp, a school visit, or a public shout-out for a local organization can raise more than your own check.

4. 4
   Set a giving budget

   Decide a yearly amount with your CPA so giving stays generous and sustainable.