Private family foundations are not reserved for billionaires, although we most often hear about them in connection with famous people.
You and various members of your family may be considering establishing this kind of foundation in order to further certain goals that are close to your heart.
About private family foundations
Organizers create a private family foundation or PFF in order to contribute to charitable causes. As a legal entity and a 501(c)(3 ) tax-exempt organization, it must operate for charitable, religious or scientific reasons. The foundation can also exist for education or literary purposes, to promote amateur sports competitions or to focus on preventing cruelty to children or animals.
Private family foundations are either operating or non-operating entities. Usually, small groups of family donors create and fund non-operating foundations and through them make grants to public charities. Creating this kind of foundation may help the family facilitate lifetime and testamentary gift-giving goals. Income tax benefits are available while the family controls investment and organizational funds for upcoming charitable projects. On the other hand, operating foundations use their assets for directed activities similar to the way public charities work.
If you decide to establish a private family foundation, you will realize certain benefits, among others, in addition to contributing to a charitable cause:
– You will minimize your estate tax
– You avoid capital gains tax on the sale of any appreciated property you contribute to charity
– You can provide ongoing foundation activities and employment for family members
Moreover, in establishing the foundation, you will preserve your family name for the next generation and perhaps well into the future.