Centara Connection

Family Foundations Broaden the Benefits of Charitable Giving

Brittany Oates, Estate Planning Attorney

Over the past few years, awareness about the importance of estate planning has increased. Surprisingly, one aspect that often gets overlooked is charitable giving.

Establishing a family foundation is the equivalent of starting your own charity for the distribution of your wealth and shouldn’t be overlooked as an advantageous way to accomplish your estate and tax planning goals. Setting up a family foundation to distribute charitable gifts does not require an Oprah size estate. Three out of five family foundations reported assets totaling less than $1 million. Two thirds of larger family foundations were formed in the 1980s and 1990s.1

A family foundation is usually structured as a trust or a nonprofit corporation with the donor and/or family members serving as trustees or directors. The foundation can support whatever charitable projects or organizations you decide are worthwhile while keeping members of your family actively involved in the community. For young adults, helping handle the foundation's business may provide valuable experience in planning, financial management, and working productively with others. Many family foundations continue for generations to support philanthropic causes.

Contributions to a family foundation are deductible within certain limits. If you establish a foundation during your lifetime, your contribution may save a substantial amount of federal income tax and reduce the size of your estate. Similarly, a charitable bequest is deductible for federal estate-tax purposes. Funding your family foundation with appreciated securities can provide additional benefits. Within tax law limits, you can deduct the full current market value of publicly traded stock or mutual fund shares you donate to your foundation. You won't pay current capital gains tax on the donated securities' appreciation, and your foundation will not have to pay capital gains tax if it later sells the securities.

Seeking the help of a professional advisor is essential if you want to gain the control, flexibility, and tax advantages of a family foundation. In addition to your attorney, your planning team might include your CPA, investment advisor, and others. If you have any questions or would like to receive additional information about setting a private foundation, please contact David Gebhardt at Centara Legal Group, APC.

1 The Foundation Center, New York City in partnership with the National Center for Family Philanthropy in Washington D.C., has conducted the first-ever comprehensive study of U.S. family foundations.

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