For many, charitable giving is at the heart of their family culture. Indeed, it is often this value and a sense of mission that parents and grandparents most deeply desire to instill in younger generations. Certainly, the most important way this desire is fulfilled is through the relationship of family members. However, to cultivate a knowledge and appreciation of charitable giving in a more formal manner, a private family foundation may be considered both during life and in designing one’s estate plan.
What is a Family Foundation?
A family foundation is an entity, usually a corporation or trust, through which families can make contributions to charitable organizations while retaining certain controls, such as the mission of the foundation, who will receive grants, and how undistributed assets will be invested. Such contributions to the family foundation enable the donor to claim an income tax deduction when the asset is given to the foundation rather than when the foundation ultimately distributes its assets or earnings to charities.
Benefits to Community and Family
Setting up a family foundation creates both tangible and intangible benefits for the community and for family members. A family foundation allows families to create a lasting impact both by giving to causes that comport with the foundation’s mission, whether charitable educational, religious, or scientific, as well as through setting a positive example in their community. A family foundation also offers families a structure to train up children and grandchildren in the appropriate investment and distribution of wealth. All family members, regardless of age or sophistication, may be afforded the opportunity to participate in some aspect of the foundation’s mission.
Integration with Estate Planning
A private family foundation can be created and funded during life, under an estate plan, or a combination of both. Funding the foundation during life allows the donor to participate in the charitable giving process and to form the way in which the foundation will be managed by younger generations. Perhaps most importantly, setting up a family foundation gives donors the opportunity to spend time with younger family members in the context of a noble enterprise. On the other hand, a family foundation may also be integrated as part of an estate plan and created and funded upon death, whether through a will or a trust. The estate plan would outline the charitable wishes of the donor, designate the individuals who will manage the foundation, and specify which assets will be contributed to the foundation.
A family foundation can be a very useful structure through which to build and pass on the family name and a culture of giving. Setting up a foundation benefits both the community at large and the family in every generation. Whether created during life or incorporated into an estate plan, a family foundation may be the ideal structure for certain families to accomplish charitable giving.