When your family is committed to establishing your legacy and making a difference through significant philanthropy, the creation of a family foundation may be an effective way to accomplish your goals. A family foundation can provide you with much more control over your charitable contributions than donating to other organizations, as well as providing important tax benefits.
While the creation of a family foundation has many significant advantages for families serious about charitable giving, there are also legal complexities associated with the creation and operation of a private foundation. Clarity Legal Group® can provide assistance in determining if creating a family foundation makes sense given your family’s goals, and we can assist you in creating your foundation, applying for exempt status for your foundation, and understanding and complying with operating requirements for a charitable foundation.
Is Creating a Family Foundation the Right Choice for You?
A family foundation allows you to take more control over your philanthropic efforts. Instead of giving money to other organizations, you can create a family foundation that one or more family members manages. A family foundation may make sense where the family has significant charitable goals that they want to fund as a family and because they wish to have the maximum control over how their foundation funds are used.
Private family foundations can carry out their own charitable endeavors directly, such as using the funds to build schools or purchase and distribute food to localities in need of food aide. Family foundations can also make contributions to other organized charities. Family members who are vested with the responsibility of managing the family foundation may be given flexibility in how foundation assets are used to achieve a specific allowable charitable purpose that the foundation was created to serve.
Family foundations make it easier for wealthy philanthropists have more control of their charitable giving. They can also be a helpful way to involve all family members in making philanthropic decisions, in teaching children about philanthropy, and engaging younger family members in managing family funds. Many heirs or beneficiaries appreciate being given the opportunity to direct foundation dollars to causes that are important to them.
What is Involved in Creating a Family Foundation?
When you have made a decision to create a family foundation, the foundation may be created during your life or by testamentary disposition. In many cases, the family foundation is created during the primary donor’s lifetime so that he or she can enjoy the work that the foundation will do. In addition, the donor can oversee foundation management in its early years. If a foundation is to be created at the death of the donor, it may be necessary to revise organizational documents in order to obtain tax exempt status.
All organizational documents must be created in accordance with both state and federal law, regardless of whether the family foundation is created during the founder’s life or by testamentary disposition. The foundation can only operate for an exempt charitable purpose under the law and its organizational documents will define the charitable or educational purpose for which the foundation has been created. In addition, the IRS imposes deadlines for applying for tax exempt status for a family foundation. Once created, a family foundation must comply with all regulations relating to charitable family foundations, and our attorneys can assist you in understanding these requirements.
How can Clarity Legal Group® Help?
Clarity Legal Group® can assist you in assessing your goals for your philanthropic efforts and help you determine if creating a family foundation is the right approach to accomplish your philanthropic goals. Our Durham Estate Planning Attorneys will assist you in the proper formation of your foundation and will advise you on the rules for operating a family foundation, and will assist you in compliance with all requirements for both creation and operation.