Private Foundations: Questions, Answers and Options
Private Foundations: Questions, Answers and Options

considering a private foundation

People who consider a forming a private foundation do so for many different reasons. When evaluating whether a private foundation might be right for your client, there are many considerations, ranging from selecting the assets that will be gifted to discovering the client’s appetite for administration and method of making grants. Knowing what questions to ask can help you determine whether a private foundation is the best option or, if not, what alternatives might better meet your client’s goals.

In this white paper, we address questions such as:

  • Why does your client want to form a private foundation?
  • What assets will be used to make the gift?
  • Does your client feel comfortable investing as a fiduciary rather than as an individual?
  • Does your client know what charities and causes they would like to support? If multiple people are involved with making decisions, can they agree on these issues?
  • How much time and interest does your client have for administrative tasks?
  • Does your client have any concerns with privacy?
  • Who would your client like to serve as successor? Will that person be interested in doing so and aligned with your client’s charitable goals?
  • What are the alternatives to a private foundation?

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enhancing the benefits of a a private foundation

Operating a private foundation allows a client to maintain high public visibility about their charitable work while providing great control over board appointments and investment decisions. But these along with these benefits, private foundations often present clients with various challenges, from tax issues and legal compliance to succession planning and engaging the next generation in the work of the foundation.

In this white paper, we address these issues and examine what services and options exist to mitigate these challenges and enhance the efficiency, effectiveness and ease of administration of your client’s private foundation. Issues addressed include:

  • meeting year-end distribution requirements to avoid tax penalties
  • donating appreciated closely-held business interests to maximize tax benefits
  • making grants to foreign charities
  • determining which charities to support
  • supporting charities while maintaining the client’s privacy
  • engaging the next generation in the foundation’s activities
  • finding a successor

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when a private foundation no longer fits

Operating a private foundation is like running a business. The client must, among other things, hold board meetings, invest assets, review investment performance, vet charities, make grants and review and file returns. Even though the client may hire professionals to help with these tasks, they still have work to do to comply with fiduciary duties and other federal and state rules. As time goes on, clients with a private foundation may find they are exhausted by the administrative burdens or that the challenges of running the foundation are preventing them from making their desired impact.

In this white paper, we examine the issues and options involved in terminating a private foundation or converting its assets to another charitable vehicle that is better suited to the needs and goals of the client. Topics covered include:

  • terminating a private foundation and distributing its assets outright
  • converting the private foundation to a donor advised fund or other type of charitable vehicle
  • the stages of a private foundation conversion

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we're here to help

We hope you find this information helpful during your conversations with clients. If you or your clients have questions or would like to discuss further, our charitable giving experts are available to provide you with the answers, solutions and support you need. Please contact us at (213) 239-2310 or pschulz [@] calfund [.] org.

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