3 Benefits of Establishing a Private Foundation



Per the 2017 Giving USA report, foundational giving comprises 15% of America’s nonprofit contributions, coming in second after individual contributions which comprise a total of 72% of America’s giving. In total, the individual contributions represent approximately $281 billion, while the 15% represent approximately $59 billion. In reviewing the numbers, it’s clear that a pretty sizeable chunk comes from foundations.

While individual donations certainly facilitate nonprofits’ growth, foundational support offers a level of structure and stability seldom available with individual donations. Typically, foundations offer grants designated for specific purposes—such as to fund educational programs, or purchase new equipment. Although individuals can place similar designations on their donation checks, busy nonprofits may not take care to maintain individuals’ requests.

For people who donate regularly to one more nonprofits, opening a private charitable foundation offers both personal and monetary advantages. Below, are three key benefits to establishing a charitable foundation.

Savings on Estate and Income Taxes

 There can be significant tax gains for individuals who establish their own foundations. Assets distributed to the foundation become removed from one’s overall taxable estate. To give an example, if a person gave all their assets to the foundation, their estate may pay no estate taxes.  Setting aside large sums of money to a foundation keeps people in a financial driver’s seat—rather than allowing tax money to go to the government, it can instead go to the charitable foundation!




Greater Control in How Nonprofits Utilize Funds

 A foundation can make grants for specific types of causes and purposes. As a result, there’s greater assurance that nonprofits will utilize the funds in accordance with the foundation’s preferences and expectations. When one donates individually, this type of assurance is more difficult to maintain. Also, nonprofits regularly seek grants for a variety of areas. By creating a foundation, one may draw the attention of up and coming organizations doing work that’s meaningful to the founder.

Family Involvement

 Involving family in a foundation may not be for everyone. For others, however, it’s important to incorporate family in the foundation’s charitable goals of planning. Family members can serve on the Board of Directors, or participate in the implementation of charitable goals. Other family members may serve as ambassadors of the organization. Younger family members may be educated in how to preserve a foundation’s legacy after the founder has passed on.

Creating a private foundation can hugely beneficial, both to the recipient causes, the founder, and to any involved family members. For those interested in a meaningful way to balance their existing assets, they should seek the support of an attorney experienced in charitable planning.