A private foundation has many advantages for the high net worth (HNW) individual. Along with the tax benefits, the foundation also provides a way of keeping families together.
Private foundations sound like they are only appropriate for the ultra-rich; but that’s not the case. There are over 90,000 private foundations in the U.S. and 98% are under $50 million. In fact you can start a private foundation with as little as $250,000 according to Foundation Source.
Of course the immediate advantage of a private foundation is the tax benefit you get from funding it. It sets you apart in the world of philanthropy and allows you to leave a legacy that can outlive you. It also provides protection from unsolicited requests for donations; you can always tell people that it’s a wonderful cause but you’ll have to check with your board.
But one of the major benefits of a family foundation is that it can act in many ways like a family business. It can create the glue to keeps a dispersed family together working toward a common purpose. It creates a way of instilling family values and transmitting those to a younger generation.
A large proportion of family foundations have two or more generations on the board. Most are set up as family affairs with membership limited to immediate members of the family.
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