FAQs About Private Foundations


Categories: Starting a Foundation

Search Topics: Private Foundations Basics

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What is a private foundation? A private foundation is a not-for-profit entity that is controlled by, and receives most of its funding from, a single individual, family, or business.

What are the benefits of a private foundation? A private foundation provides the greatest control of any charitable giving vehicle. It establishes a legacy of giving, helps you involve the family in philanthropy, and provides an immediate tax deduction for gifts that are made in the future.

How may foundation assets be used? Contributions to a private foundation may be used for charitable purposes and certain qualifying expenses such as site visits, board meetings, and administrative fees.

May I or members of my family be employed by my foundation? Yes, however, paying yourself or family members requires strict adherence to detailed IRS rules.

How can foundation assets be invested? Foundations may invest in nearly any type of asset as long as you follow the prudent investor rules.

Grantmaking: What kinds of donations are legal? Foundations typically grant to U.S. 501(c)(3) public charities. However, they may also provide scholarships, make grants directly individuals for emergency and hardship assistance, and grant internationally, as long as they meet certain IRS criteria. Foundation Source assists clients in making these types of grants.

What is the tax deduction for donations to a private foundation? Typically, donations to a private foundation are tax deductible up to 30% of adjusted gross income (AGI) for cash, and up to 20% of AGI for appreciated securities, with a five-year carry forward.

What is the minimum size for a foundation? Foundation Source makes it possible to establish a new foundation in less than a week with minimum initial funding of $250,000.

Does Foundation Source manage the foundation’s assets? No, we do not manage or custody assets, but we coordinate closely with the financial advisor you designate.

Does Foundation Source provide legal or tax advice? No, Foundation Sources does not provide legal or tax advice, but we coordinate closely with the trusted advisors you designate.

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