Estate Planning Through Private Foundations

estate planning private foundations

In past articles I have written about scholarship trusts established under Charitable Remainder Uni -Trusts or Charitable Remainder Annuity Trusts in your estate plan as a means of satisfying your philanthropic wishes.
Another interesting way to satisfy your philanthropic goals is through a Private Foundation.

Private foundations have always been thought of as an estate planning tool for the most affluent individuals.  On the contrary, a foundation is a consideration for anyone that is making a sizable gift to a charitable or not-for-profit organization.

Setting up a private foundation during your lifetime allows you to become an active participant in the charitable cause you are looking to advance by way of your generosity. Your cause may be providing scholarships for those students that meet a certain criteria your foundation outlines. A private foundation gives you the freedom to make anonymous gifts thereby freeing you from receiving a constant flood of telephone and postal solicitors at home.

Aside from the charitable intent of a private foundation, it provides financial and emotional rewards for you and your family. As an example, you may appoint family members to your private foundation’s board of directors. As such, your family members will share in decisions as to how to distribute dollars to certain charities in keeping with the charitable goal of the foundation instilling a sense of giving back.  A foundation funded with a major donation may be large enough to provide compensation for family members who carry out administrative functions or serve on the board of directors.

Finally, if you are approaching retirement (or are already there), a private foundation offers an opportunity to stay active. By taking responsibility for reviewing grants and performing other foundation duties, you can play an important role in the welfare of the community and the world at large. At the same time you can increase your knowledge and skills, using your creativity and energy in new ways.

There are many tax benefits to creating a private foundation; including, income, estate and gift tax deductions.  Very similar to the deductions you receive for your current charitable gifts.  If you are thinking about establishing a private foundation I strongly urge you to work with your accountant and your estate planning attorney to be sure you avoid any pitfalls.  This is not a do-it-yourself project as there are a myriad of tax code rules and restrictions that must be followed. With thanks to Merrill Anderson Company for some thoughts.

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About Ira Brower

I have been in the financial service industry for more than 40 years primarily providing wealth management solutions for retired and soon-to-be retired individuals. I am President and Founder of Garden State Trust Company. Our clients depend on us for elder care solutions, such as; trust and estate planning, investment services, and lifestyle management. We also administer to “special needs” or “supplemental needs” trusts.

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