Top 10 Advantages of a Private Foundation

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Categories: Starting a Foundation

Search Topics: Private Foundations Basics

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1. Tax Savings: You get the tax deduction when the foundation is funded, then make your charitable gifts over time.

2. Leave a Lasting Legacy: Foundations set up in perpetuity can burnish your name far beyond your lifetime. Because gifts are made from an endowment that generates investment revenue, the total gifts made by the foundation can far surpass the actual funding.

3. Build a Better Family: As family members take on philanthropic research, present their findings to the board, participate in the decision-making process, and track results, they hone skills that will serve them for years to come.

4. Sidestep Unsolicited Requests: When you focus your foundation on specific giving areas, your mission statement can be used to politely turn down off-target funding requests.

5. Put Your Dollars Where They Will Do the Most Good: Private foundations commonly grant to public charities, but that’s not all they can do.

6. Run Charitable Programs Without Setting Up a Separate Nonprofit: Direct charitable activities are IRS-approved programs that permit foundations to directly fund and carry out their own projects.

7. Make Loans Instead of Grants: When used to support a charitable purpose, private foundations can employ loans, loan guarantees, and even equity investments, which are paid back (potentially with interest), so you can recycle your philanthropic capital for other charitable causes.

8. Pay Charitable Expenses: All legitimate and reasonable expenses incurred in carrying out the foundation’s charitable mission can be paid by the foundation and will count toward the annual minimum distribution requirement.

9. Hire Staff (Even Family Members): If you have a foundation, it’s permissible to pay qualified staff for their foundation-related work—even if your foundation is staffed by family members.

10. Train the Next Generation for Success: Many families of wealth want to give their children “enough to do something, but not enough to do nothing.”

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