When Does it Make Sense to Set Up a Private Family Foundation?
Are you considering making a large contribution to one or more charitable causes? Do you have other family members with similar views? A private family foundation may be the most effective option to achieve your goals. Here, our New Jersey estate planning lawyer explains the key points to know about setting up a private family foundation.
What is a Private Family Foundation?
Fidelity Charitable describes a private family foundation as a type of charitable foundation that is set up, funded, and administered by a family. In other words, it is a charitable organization that is funded and controlled by a specific family. Often, private family foundations will donate money and property to other charitable organizations. In many cases, the foundation invests its endowment and uses the income generated to make grants to nonprofits or to fund charitable activities directly.
Three Reasons to Set Up a Private Family Foundation
Are you and your close loved ones considering setting up a private family foundation in New Jersey? It may be the best option for your specific goals. Here are three of the most notable benefits:
- Tax Advantages: Establishing a private family foundation can offer some significant tax benefits. Donors can receive immediate tax deductions for cash or appreciated assets donated to the foundation—and that can potentially reduce their taxable income. Beyond that, certain assets controlled by the foundation may grow in a tax advantaged setting.
- Family Legacy and Philanthropic Control: A private family foundation allows a family to establish a lasting charitable legacy under their name. It fosters a tradition of giving across generations. The foundation also provides the family with control over the foundation’s charitable activities—from the selection of grant recipients to the types of causes supported.
- Educational Opportunities for Young Family Members: By involving family members in the foundation’s operations, younger generations can learn about managing wealth, making informed philanthropic decisions, and understanding the logistics of grantmaking. The involvement can serve as a practical education in financial stewardship and charitable giving.
The Biggest Drawback of a Private Family Foundation
A private family foundation is complicated. There are start-up costs, administrative burdens, and complex regulatory requirements. The biggest drawback of setting up a private family foundation is the inherent time and effort involved. It is not the right option for every situation. For example, if you want to leave a one-time gift—even a large gift—to a charitable organization, setting up a foundation is unlikely to make sense. However, if you want to be involved directly in a long-term project of supporting good causes, a private family foundation may be a great option.
Consult With Our New Jersey Estate Planning Attorney Today
At Poulos LoPiccolo PC, our New Jersey estate planning lawyer is committed to providing solutions-focused support to clients. If you have any questions about setting up a private family foundation, please do not hesitate to contact us today for a confidential consultation. Our firm provides estate planning services throughout the State of New Jersey.
Source:
fidelitycharitable.org/guidance/philanthropy/private-family-foundation.html
