Many wealthy people create private foundations as a way to continue using their wealth to support causes they believe in after they pass away. It is an extremely important part of many estate plans. However, for private foundations to work after the founder passes away, it is important to plan properly.
With private foundations, wealthy families and individuals can create a fund of money that can be invested with the proceeds going to good causes for generations. For those who want to make charitable giving a part of their estate plans, foundations provide a way to make that giving last.
When the founder passes away, however, many private foundations have floundered, with the successors unable to maintain them.
Recently, Forbes published some tips on making sure that does not happen to your foundation in an article titled "Do's And Don'ts of Passing Down A Private Foundation."
The list includes:
- Write a mission statement - With a mission statement, successors have a document that tells them what the foundation is supposed to do. Consequently, the statement can be referenced should there ever be any questions about the foundation’s objectives.
- Pay attention to family dynamics - Not every family member will be interested in participating in the foundation.
- Turn to experts - If you need help, seek out someone with expertise.
- Make connections - Network with other philanthropists.
- Plan for successions - Do not just name a board. Also name who will succeed those board members.
Family foundations can be an excellent way to continue your charitable legacy long after you are gone. There are other alternatives, however, that may be more appropriate for your unique circumstances. For example, donor-advised funds are less expensive to create, enjoy reduced scrutiny from the IRS and may provide greater tax deductions for the donors.
In the end, turning to “experts” is probably the best advice from this article. Accordingly, contact an experienced estate planning attorney who can help you navigate the rather complex waters.
Reference: Forbes (February 11, 2015) "Do's And Don'ts of Passing Down A Private Foundation."