I know someone who did it.

[link|http://www.bizforward.com/wdc/issues/2002-09/money/foundation.shtml|Linky]:

There are many financial instruments families can set up to handle chunks of charitable change, and the family foundation isn't the simplest of them. Creating a family foundation requires appointing a board of directors, holding meetings and taking minutes. The foundation has to file its own taxes and register as a 501c(3) nonprofit corporation. It doesn't have to have a full-time staff, just someone willing to watch the books. But depending on the mission, foundations can be manned by a small army. The hassle is enough to deter the faint-hearted, experts say. Financiers instead often will direct their philanthropically minded clients to what is called a donor-advice fund, a sort of charitable mutual fund. Donors contribute to a fund managed by a larger organization. When the donor wants to give to a charity, he or she asks the fund manager to cut a check. The fund manager has the power to veto such requests, because the Internal Revenue Service requires that donors not have total control over the money. But a veto rarely happens, and the donor-advice fund makes sense for anyone who has less than $1 million to put into such a fund, says Bessemer's Shelly.

Only once the available amount exceeds $1 million - and many experts prefer the number to be closer to $5 million or $10 million - do financiers consider creating a family foundation. At that point, the cost and hassle become minimal relative to the value and mission of the fund. Having a foundation allows much more choice over how much money is given and to whom. "Younger philanthropists are more interested in outcomes and being able to measure whether their money made a difference," Dakin says.

But it's the difference in degrees of control and the notion of legacy that appeal to people who start a family foundation with less than the recommended $1 million. "If you have an accountant, the accountant can set it up," Hundt says. "No one can cite the hassle factor as an excuse for not doing charity."

There are rules, of course. Donors can deduct cash gifts up to 30 percent of their adjusted gross income (AGI) each year. When donors contribute appreciated stock, they can write off the total value of the stock, even if they bought it for $2 a share and contributed it at $400 a share, up to the limits. And all assets given to a foundation in a will are fully deductible, helping to reduce federal estate taxes substantially. Foundations must give away at least 5 percent of the fund's value each year.

I remember that last bit whenever I hear a glowing story about how much the [link|http://www.gatesfoundation.org/MediaCenter/FactSheet/default.htm|Bill & Melinda Gates Foundation] gives away. If you compare the annual giving with the endowment you see it is, you guessed it, 5%.

A family foundation wouldn't be a good choice for those who just want to shield assets from the IRS, IMO (but note that I'm not a tax adviser, etc.). An [link|http://www.nolo.com/article.cfm/objectID/2D207FE3-B4EC-4599-BE0A3981C99F0D10/309/227/ART/|AB Trust] might be a better choice for upper-middle class families, but note the caveats.

Also note that lots of people think that some sort of trust is always needed to avoid probate. At least in [link|http://www.fairfaxcounty.gov/courts/circuit/probate.htm|Virginia], probate isn't needed in many common cases even without a trust, e.g., if there's a valid a "self-proving" will and if all property is owned jointly with your spouse. Setting up the paperwork for my inlaws was just a few hundred dollars with a lawyer who specializes in such things.

Cheers,
Scott.

Post #253,809 by broomberg 4/28/06 10:27:14 PM Reply	I know someone who did it. Not as a company, but as a "Foundation". All people in the family are members. Foundation pays the bills.
Post #253,810 by ben_tilly 4/28/06 10:34:33 PM Reply	I know multiple people who've done that The first one who ever mentioned doing that, though, was a CFO. Coincidence? I bet not! :-) Cheers, Ben I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
Post #253,815 by Another Scott 4/28/06 11:04:37 PM Reply	That's a little different, as I understand it. [link\|http://www.bizforward.com/wdc/issues/2002-09/money/foundation.shtml\|Linky]: There are many financial instruments families can set up to handle chunks of charitable change, and the family foundation isn't the simplest of them. Creating a family foundation requires appointing a board of directors, holding meetings and taking minutes. The foundation has to file its own taxes and register as a 501c(3) nonprofit corporation. It doesn't have to have a full-time staff, just someone willing to watch the books. But depending on the mission, foundations can be manned by a small army. The hassle is enough to deter the faint-hearted, experts say. Financiers instead often will direct their philanthropically minded clients to what is called a donor-advice fund, a sort of charitable mutual fund. Donors contribute to a fund managed by a larger organization. When the donor wants to give to a charity, he or she asks the fund manager to cut a check. The fund manager has the power to veto such requests, because the Internal Revenue Service requires that donors not have total control over the money. But a veto rarely happens, and the donor-advice fund makes sense for anyone who has less than $1 million to put into such a fund, says Bessemer's Shelly. Only once the available amount exceeds $1 million - and many experts prefer the number to be closer to $5 million or $10 million - do financiers consider creating a family foundation. At that point, the cost and hassle become minimal relative to the value and mission of the fund. Having a foundation allows much more choice over how much money is given and to whom. "Younger philanthropists are more interested in outcomes and being able to measure whether their money made a difference," Dakin says. But it's the difference in degrees of control and the notion of legacy that appeal to people who start a family foundation with less than the recommended $1 million. "If you have an accountant, the accountant can set it up," Hundt says. "No one can cite the hassle factor as an excuse for not doing charity." There are rules, of course. Donors can deduct cash gifts up to 30 percent of their adjusted gross income (AGI) each year. When donors contribute appreciated stock, they can write off the total value of the stock, even if they bought it for $2 a share and contributed it at $400 a share, up to the limits. And all assets given to a foundation in a will are fully deductible, helping to reduce federal estate taxes substantially. Foundations must give away at least 5 percent of the fund's value each year. I remember that last bit whenever I hear a glowing story about how much the [link\|http://www.gatesfoundation.org/MediaCenter/FactSheet/default.htm\|Bill & Melinda Gates Foundation] gives away. If you compare the annual giving with the endowment you see it is, you guessed it, 5%. A family foundation wouldn't be a good choice for those who just want to shield assets from the IRS, IMO (but note that I'm not a tax adviser, etc.). An [link\|http://www.nolo.com/article.cfm/objectID/2D207FE3-B4EC-4599-BE0A3981C99F0D10/309/227/ART/\|AB Trust] might be a better choice for upper-middle class families, but note the caveats. Also note that lots of people think that some sort of trust is always needed to avoid probate. At least in [link\|http://www.fairfaxcounty.gov/courts/circuit/probate.htm\|Virginia], probate isn't needed in many common cases even without a trust, e.g., if there's a valid a "self-proving" will and if all property is owned jointly with your spouse. Setting up the paperwork for my inlaws was just a few hundred dollars with a lawyer who specializes in such things. Cheers, Scott.

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