Establishing a private foundation brings both responsibilities and rewards

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05/28/2014 by US tax services
Insights: Establishing a private foundation brings both responsibilities and rewards

At a glance

For individuals contemplating substantial charitable contributions, private foundations may provide a structure to create a legacy of charitable giving.


High-net-worth individuals have a long history of charitable giving. Historically, many individuals made their contributions directly to public charities. For families contemplating substantial contributions, private foundations provide a structure to create a legacy of family charitable giving. Even as donor advised funds and community foundations have become more popular for their ease of administration and cost, private foundations remain a popular vehicle for charitably inclined families. Private foundations provide families with the opportunity to formalize their philanthropic goals and to set a course for the future. Additionally, private foundations allow younger family members to become involved with these philanthropic goals, establishing a continuous impact through the generations. Private foundations can also be used as a means to accelerate tax deductible charitable contributions, while still maintaining family control of the funds.

While a private foundation may appeal to an individual for a variety of reasons; private foundations come with responsibilities. Prior to forming a foundation, consideration should be given to, among other things, developing a clear charitable mission, determining appropriate assets for funding the foundation and becoming familiar with unique rules and related penalties associated with these organizations. Whether a private foundation provides benefits superior to a donor advised fund or community foundation must be evaluated.