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GIVING THROUGH A PRIVATE FOUNDATION
Private foundations are generally founded by an
individual, a family or a group of individuals, and
are organized either as a nonprofit corporation or
as a charitable trust. You can appoint yourself, as
well as other family members or friends, to sit on
the foundation’s governing board.
One common form of a private foundation is a
family foundation. Families sometimes use a
family foundation as a forum in which family
members can work toward common goals, or as
a way to instill the value of charitable giving in
future generations of the family.
Since a private foundation is a charitable
organization, it is exempt from federal income tax
on its income, although it must pay a 1-to-2 percent
excise tax on its net investment income. The gifts
you make to establish a new foundation or grow an
existing foundation can afford you certain tax
advantages; income, gift and estate tax deductions
are available under the law.
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| THREE MAIN TYPES OF PRIVATE FOUNDATIONS
• Private endowed foundation
• Pass-through foundation
• Private operating foundation
Private Endowed Foundation
This is the most common type of private foundation. The foundation’s financial assets create a principal—or
endowment—that is invested, and income from the endowment is paid out annually to charity. Generally, the
principal or endowment is not spent, only the investment income. Therefore, the principal can increase with
good investment, ensuring the foundation’s continuation and growth to meet future community needs. Private
foundations are required by law to pay out annual grants and other qualifying distributions totaling a minimum
of 5 percent of the fair market value of their assets.
Pass-Through Foundation
A pass-through foundation is a private grantmaking organization that distributes all of the contributions it
receives each year (not just 5 percent of its assets). The pass-through option may be made or revoked on a
year-to-year basis.
Private Operating Foundation
A private operating foundation uses the bulk of its income to actively run its own charitable programs or
services. Examples include the operation of a museum, library, research facility or historic property. Some
private operating foundations also choose to make some grants to other charitable organizations.
The professionals at Team Oliver can help you determine the best private foundation for your needs.
Contact us today for a complimentary consultation.
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Financial Life Advisors (FLA), a Registered Investment Adviser, and Jim Oliver & Associates, P.C. (JOA) are under common ownership and control. Team Oliver is used to describe collaborative services of both firms. Professional tax services are provided by JOA and investment advisory services are provided by FLA, each under separate agreements.
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Sign up here to schedule a
COMPLIMENTARY
consultation with a member
of Team Oliver.
Please bring a copy of last
year's income tax return.
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