- Professional Advisors
The most frequently used vehicles for giving as a percentage total of giving are:
Families with private foundations, and those contemplating establishing a private foundation, are discovering significant opportunities to maximize the efficiency and effectiveness of their giving by collaborating with community foundations. We welcome the opportunity to discuss your goals and develop solutions best for your needs.
¹ 2018 U.S. Trust Study of High Net Worth Philanthropy
A companion PassionFund with the community foundation can complement your private foundation in several important ways.
PassionFunds can provide anonymity in grant making. Private foundations must disclose their grant making on their tax filing, IRS Form 990, and this information is searchable online, e.g. Guidestar and Foundation Center Library. The United Way – Community Foundation IRS filing does not identify the source of particular grants, which affords the donor a level of privacy that a private foundation cannot provide.
EXPANSION OF MISSION
A PassionFund can make grants that fall outside of the stated goals of the private foundation so mission conflict is avoided. For private foundations that have a specific mission focus, such as education initiatives, a grant to fund a cancer unit at a local hospital may be inconsistent with the mission but still of interest to the principals of the foundation.
FLEXIBILITY OF 5% ANNUAL PAYOUT
Private foundations are required to distribute a minimum of 5% of the foundation’s assets annually. On occasion this may be challenging for the private foundation. Private foundations may use a companion Donor Advised Fund to meet their 5% payout requirement. Donor advised funds provide greater flexibility of the separation of timing of the contributions to the fund and when and how much is granted to charities as recommended by representatives of the private foundation over time. It is generally recommended the funds contributed to the donor advised fund from the private foundation are granted to qualified charities in a relatively short period of time, e.g. 1-2 years.
MULTI-GENERATIONAL PARTICIPATION IN PHILANTHROPY
Private foundations often include family on staff and on the governing board to work together to build philanthropy and create a legacy of family giving. Challenges can occur as successive generations develop their own individual charitable interest but for purposes different from the private foundation’s defined mission or geographic focus. Donor advised funds provide the family members an opportunity to work together and contribute to the causes most meaningful to them.
SPECIALIZED SERVICES TO PRIVATE FOUNDATIONS
The community foundation provides assistance for complex grant making such as endowments, naming rights, matching grants, challenge grants, grant monitoring and reporting.
With a donor advised fund, we handle the administrative, accounting, legal, and reporting requirements, so you can focus on the joy of giving.
This comparison chart may help you determine which makes better sense for you or your client.
Administrative paperwork, expense, research on charitable organizations, and ongoing legal and financial due diligence are only some of the factors to consider when maintaining a private foundation. For the founder or family members the work can be drudgery and negatively affect their joy of giving.
Over time, private foundations often struggle with issues such as:
These considerations, along with the increased recognition of advantages of donor advised fund as a family foundation alternative, have prompted families to terminate their private foundations and transfer assets to donor advised funds. Some transfer their assets in a lump sum; others start with a minimum contribution of $10,000, and then add to their fund over time.
Section 507 of the Internal Revenue Code permits termination of a private foundation in either trust or corporate form with distribution of its assets as a qualified distribution to a public charity. Private Foundations considering a transfer should get help from an attorney with experience in handling this kind of transaction.
With appropriate planning, principals of the foundation may remain involved in grant making if that is their desire. Teamed with the expertise of our local professional staff, they will be able to ensure that their intent, name and pattern of charitable giving are maintained in perpetuity if they wish.