Want to Leave a Legacy of Giving? Consider a Private Foundation
You’ve developed wealth. You’re determined to use it to make an impact on the world. While you enjoy supporting causes you’re passionate about, you also hope to transfer your charitable values to your children.
If this describes you, you’re in good company. A survey of 600 high-net-worth families by the U.S. Trust and the Lilly Family School of Philanthropy found that those families gave an average of $68,580 in 2013. Of those surveyed, roughly 41% had family traditions that centered on giving.
So, how do you set the foundation for multigenerational giving? You set up a foundation.
Ensuring Your Legacy
Creating a private family foundation specifically to support philanthropy is an inspired way to ensure that your code of giving lasts beyond your generation. Here’s why setting up your own foundation is superior to simply teaching your children that giving is generally good:
- You can involve family members. Nothing says responsibility like a proper, titled role in a foundation. Whether you aim to make your eldest attorney daughter Vice President of your foundation and your dean’s list grandson a Trustee, you can. By giving your relatives foundation titles, you’re showing them that your organization is real, developed and committed. Use a professional to handle taxes and accounting for your foundation, but feel free to give responsible family members titles, thus providing more weight to their ideas and wishes. As a bonus, you can employ family members for your foundation, which allows them to receive salaries through the foundation.
- You can shift investment goals. When you start your private family foundation, you probably hope to give the same monetary amount each year. The U.S. Trust and Lilly Foundation study discovered that roughly 62% of families set a budget for their charitable donations. While this is a noble goal, the flexibility of having a foundation gives another positive: It allows you to adjust how much you’ll give each year—as long as you reach a set minimum. It also allows you to give much more than money. With a foundation, you can give stock, real estate, artwork and other assets to your favorite nonprofit.
- You can minimize taxes. By having a private family charitable foundation, any earnings by your foundation are tax-exempt. In fact, if you assemble your charitable foundation in the right way, you’ll sidestep capital gains taxes on any highly appreciated assets. You can also save almost 50% in estate taxes if you’re in the right tax bracket. There are numerous benefits to running your own charitable foundation, so speak to a financial advisor about how you can save on taxes.
- You can be flexible with causes. Over time, problems get solved. Vaccines are found. Laws are made to prevent abuse, protect citizens and feed the homeless. As time marches on, you may find that your cause is no longer a big cause (the use of elephants in the Ringling Brothers circus, for instance), or it may no longer need the support you planned to give it year after year. With a private charitable foundation, you can change your cause at any point. This allows unparalleled flexibility, as most generations have their own unique problems to solve. This flexibility can go a long way to making your foundation last well beyond your own life.
By creating a private foundation devoted to charitable giving, you can make altruism a bonding experience. Model your foundation after successful, multigenerational ventures, and enjoy using your wealth to support the common good.
Have more questions about setting up a private foundation for charitable giving? Please contact the Buttonwood Team at (816) 285-9000 or online.