Private foundations are an undervalued tool for both income and estate planning. They are often bashed in the press for being cumbersome and expensive to operate but we disagree with this opinion.
Here are some of the top reasons to utilize a private foundation:
- Tax savings – you get a current tax deduction when the contribution is made, and then, you can distribute charitable gifts over time.
- Leave a lasting legacy – the endowment contribution generates investment income, the total gifts from the foundation can far surpass the actual funding.
- Build a better family – family members can participate in the decision making process and hone skills that will serve them for years to come.
- Sidestep unsolicited requests – your mission statement can be used to politely turn down off-target fund requests.
- Put your dollars where they will do the most good – private foundations commonly grant to public charities, but they can do more.
- Run charitable programs without setting up a separate non-profit—direct charitable activities are IRS approved programs that permit foundations to directly fund and carry out their own projects.
- Pay charitable expenses – all legitimate and reasonable expenses incurred in carrying out the foundation can be paid by the foundation.
- Hire staff – it’s permissible to pay qualified staff for their foundation related work.
- Train the next generation – many families want to give children “enough to do something but not enough to do nothing.”
In general contributions to private foundations are limited to 20% of your adjusted gross income.
Our knowledgeable team at KRD can help guide you through setting up your private foundation, the IRS qualification and the annual reporting requirements. Contact us today to learn more.
Resource: Foundation Source
