Private Charitable Foundations: Get more control over your tax dollars

Private Charitable FoundationsBy Wilson Ziegler, Staff Writer

If a charitable foundation is set up in your name-either during your lifetime or after you die, you, or the person in charge of the foundation, will have greater control over your money and how it is spent. If the foundation is set up by you, you have the option of naming whomever you wish to run the foundation, and you can also save money on estate, capital gains, and regular income taxes. Interested and ready to learn more? Keep reading, while keeping in mind that the IRS does place certain restrictions on what can be done with the money from a private charitable foundation, and that laws vary from state-to-state, which is why you should seek individualized advice from your attorney and certified financial planner before making a final decision.

Benefits of a Private Charitable Foundation

  • All assets given to the foundation are removed from your taxable estate. This means that if you give your entire estate to the foundation or the entire amount over the estate tax exemption (in most cases) your entire estate will not be subject to estate taxes.

  • When assets are sold by the foundation they can, in most cases, avoid a capital gains tax.

  • If you donate publicly traded securities to a private foundation, you may be able to receive a charitable income-tax deduction for their full fair market value-up to 30% of your adjusted gross income. This deduction is less than the 50% limit for standard charitable contributions because you are contributing to a private charitable foundation.

  • You will know that your money is helping others-even after you are gone. Of course, it is up to you (or your trustee) what your foundation will stand for and who it will help, but imagine the possibilities. Your capital could help to save homeless animals, homeless people, battered women, your favorite species of Brazilian tree frog—the list is really endless.

Establishing a Private Charitable Foundation

Because laws vary by state, and since said laws are subject to restriction and revision, it makes sense to see your certified financial planner and your attorney before taking such a tremendous financial step. With estate planning, as with so many other things, what you don't know can hurt you, and what you do know can benefit you (and your beneficiaries) in the long run.