Private Charitable Foundations: A Primer

Silk, Roger D.; Lintott, James W.
July 2002
Journal of Financial Planning;Jul2002, Vol. 15 Issue 7, p84
Academic Journal
This article explores the benefits of private charitable foundations. A private foundation is a tax-exempt charity funded and controlled by individual or a family. The founder and his or her family may make tax-deductible gifts to the foundation and there is no income tax on the income earned by the foundation. In return for these significant tax benefits, the foundation must distribute a certain minimum amount each year, generally five percent, to public charities. Most foundations function as general-purpose endowment funds that the families use to make their charitable contributions. Private foundations long have been the vehicle of choice with which the extremely wealthy have conducted their charitable activities. Private foundations control a great deal of philanthropic wealth and represent an important component of philanthropic giving each year. While private foundations offer a number of tax benefits, taxes are not a sufficient reason to create a foundation. A would-be foundation creator must be interested in supporting charity, either immediately or at some time. Given some charitable intent on the part of the founder, there are several substantial financial and personal benefits to creating a foundation. A private foundation can help a donor establish a legacy, bring the donor closer to his or her children and grandchildren, save taxes and, ultimately of most importance, improve and even save lives through the charitable work it funds.


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