People give money and property to charity for a number of reasons. Among the most common are the desire to help society by funding a worthy cause and to enjoy the income and estate tax benefits derived from charitable giving.

Despite these benefits, one concern donors may have is the loss of control over money and property gifted to a charity. To meet this concern, a donor can create a private foundation that will distribute its donations and income to charitable causes favored by the donor.

What is a Private Foundation?

A private foundation is a charitable organization created and funded by a donor-during life or at death-that’s designed to achieve one or more specific charitable purposes. Overall management of the foundation is provided by a board of directors or trustees often selected by the donor. The directors or trustees can be paid reasonable compensation for their services.

Technically, tax law describes a private foundation as a charitable organization exempt from income tax under IRS Sec. 501 (c) (3) other than the following: 

In addition, a private foundation doesn’t include any charitable organization which:

Choice of Entity

A private foundation can be structured as either a corporation or a trust. There are advantages to each type of arrangement. 

Be sure to consult with your legal and tax advisors to discuss this and other charitable giving concepts. AA!