Do you want to set up a family foundation? It does not matter whether the family is large or small. You should know what you should expect from such a foundation. There are benefits for both you and others.
Management Benefits. You will have more control over how your family foundation is used by you. Separate designated foundation funds from all other assets so that if there are legal issues with your other investments, your contributions stay intact.
Tax Advantages. The tax laws on charity and other non-profits vary greatly, but a family foundation is treated just like any other type of trust, allowing you to take advantage of the reduced income tax rate.
Financial Support and Accountability. A family-based foundation can provide additional financial resources that you and your family may need when you are ill or need other assistance.
Charitable Activity Opportunities. As a family-based foundation, you will have more flexibility in choosing the kinds of programs you would like to support. In addition, your children’s interests may have more influence on which kinds of charities you support. And, your children’s interests are likely to be more directly related to your interest in the topic, which means that you are more involved in their decision making process.
Charitable Appeal. Many people find that their children are happier when they are members of a family-based foundation. They also find that they are more satisfied in their community because of the support they get from the foundation.
Foundation Services and Benefits. When you operate a family foundation, the tax benefits you receive and the increased tax benefits you accrue through other family members are important reasons for establishing a family charitable organization.
If you want to establish a family charitable organization, there are many options available to you. It is possible to choose your family foundation from among the hundreds of options offered by the U.S. Department of Treasury. In addition, a family-based foundation can be set up either by you or your children, or by a third party.
However, it is most important to consult with a professional lawyer if you want to establish a family charitable organization under federal tax law. Federal law requires that any family foundation operate under separate legal entities. This means that there will be two sets of records for the charitable organization and for the funds managed by the family foundation.
There will also be separate records for the accounts receivable and for the accounts payable. For example, you cannot include the balance of the checks you receive for your organization on your state tax return or on your federal income tax return. In addition, you will not be able to use those funds as a basis for personal tax planning purposes.
There are some other limitations that are applicable to any family foundation as well. These limits do not apply to other types of trusts such as: a gift-tax-exempt organization, a trust that is operated for specific family functions, a trust that is operated for education or religious purposes, or a trust that is established for the purpose of preventing certain types of harm to children.
However, many family foundations are operated as nonprofits, which means that they are exempt from state and local taxes on donations. They also are not required to file an annual report to the IRS or a separate form with the Internal Revenue Service. In addition, a family-based foundation is not required to provide any financial support to groups that are organized to work specifically for the benefit of your children.
If you choose to establish a family foundation, you should consult a lawyer who specializes in nonprofit law to determine what type of foundation is best suited for your situation. He or she will help you determine how the requirements of your state’s laws apply to your needs and what steps need to be taken to set up a foundation in the way that is best suited for your situation.
Once you have found the right family-based foundation, you can then open the doors to your new family foundation. You will have the ability to create programs, select the staff members to help you with the creation of your programs, and distribute the funds to your children, charities, or other institutions. In addition, you will have the flexibility to decide when and how much money should be distributed.