What is a Private Foundation?

Private foundations are often founded by an individual or corporation and do not receive support from the public. They are essentially a private tax exempt organization with the purpose of benefitting public charities, including educational institutions, research organizations, or other nonprofit organizations serving the public interest. A private foundation does not provide charitable services but makes grants to provide funding to other qualified charities. Private foundations are established by those who want a greater degree of control over administration, making grants and investment of the assets donated to the private foundation, than is possible with public charities.

More importantly, the private foundation of an individual or family can serve to transfer assets to the next generation. This is accomplished by involving the younger generation in the foundation’s administration, management, and grant making. Children can learn about and engage in philanthropy at an early age. When a private foundation is established by a family, all of the family members’ charitable giving can be channeled into one vehicle, resulting in larger gifts and greater impact on their chosen charities.

Depending upon your level of giving, the private foundation may serve you and your family's charitable giving in a unique and beneficiary way. Want to learn more? Provide your comment here or contact my office for further information.

What is a Qualified Charity?

As I continue to talk about charitable estate planning, it is important to define a qualified charity so that you can make the appropriate choices for your charitable estate planning. A charity which qualifies for charitable gifts is one that is a charitable organization as described in the Internal Revenue Code 501 (c) (3). All nonprofit organizations are defined by the IRS as either "public charities" or "private foundation." Public charities include churches, schools, museum, hospitals, and medical research organizations. All public charities rely on public support. Contributions to a public charity are tax deductible.

Public charities also include community foundations. Community foundations are organized as a permanent collection of endowed funds and charitable donations for the advantage of a defined geographic area. The governing body of a community foundation is made up of representatives of the general community which operate the foundation as a grant-making organizations. The community foundation accept gifts of cash and other tangible and intangible assets. Giving to a community foundation allows you to leverage your contribution with others to help make a greater impact on the recipient of the grant given by the foundation.

Tomorrow's blog will explore the private foundation and how they can be a part of your charitable estate planning. Ask your questions regarding charitable estate planning and I will provide a response for all to benefit.