Private Charitable Foundations
Your Key to Significance
“Anyone may arrange his affairs so that his taxes shall be as low as possible. He is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.” Judge Learned Hand, Helvering v. Gregory, SupremeCourt, 1935
Why start a private charitable foundation?
1. To make the world a better place. What would you change in the world, if you could?
2. Have control but not ownership. Make the decisions but not have the liabilities of ownership. Become a steward instead of an owner.
3. Flexibility: this is the most flexible financial tool available.
4. To make a personal statement, leave a legacy, share your vision and your values with children and grandchildren.
5. Empower your dream: create a new career focused on your passion to make a difference in an area of your choice.
6. Save on taxes. Be permanently free from capital gains, income taxes, estate or gift taxes by legally avoiding their creation, and redirect former tax dollars to charity. Also avoids probate. Anyone can move from taxpayer to steward and giver.
The private charitable family foundation is a non-profit entity, a 501(c)(3) exempt organization, organized for charitable, religious, educational, cultural, literary, scientific or other such purposes.
“Own nothing and control everything.” John D. Rockefeller
What is the history of foundations? Hundreds of years ago the great needs of society, the poor, the weak, the deformed, those in asylums, and orphans, on one hand, and religious teachings of love, kindness, charity and benevolence toward others, inspired those with the ability to give assistance to do so. Thus charitable bequests, foundations, trusts and other institutions began to form for the benefit of those less fortunate. The concept of stewardship evolved, of holding assets for others’ future benefit, being accountable and trustworthy in the interests of protecting those who had difficulty providing for themselves, upholding a higher law than self-focus, opening one’s heart to those in need. Philanthropy has the ability to transform individuals, families, communities and nations by providing hope, support and practical answers paid for by entrusted funds.
By the late 1800’s a few extremely wealthy families, not liking to pay taxes, chose instead to establish their own family foundations with specific charitable focus points. Since then trillions of dollars have provided huge benefits to people and causes. This same financial tool, previously perceived as available only to the elite, really is there for anyone today…anyone, no matter their financial level. Working families can enjoy the same benefits and security as have always existed for the informed few. We make it possible for partners and families to establish and manage their own private foundations, many of which begin with a $100 deposit into the bank account.
“The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.” Helvering v. Gregory, Supreme Court, 1935
Private charitable foundations have made many significant contributions to the world. The Monterey Bay Aquarium was started by a foundation. Guatemala stopped the cutting of its rainforests and supported the vision of one man (with a foundation) to excavate old Mayan and Incan cities and create a new tourist industry. A village in Africa was raised from subsistence to thriving self-sufficiency because of a foundation. A foundation in Florida outfitted all police cruisers with defibrillation units and lives have been saved. A couple with a vision to dramatically improve US agriculture soils developed a worm farm which now ships living dirt to farmers to revitalize their land. Children in California are being empowered with communication skills, to improve their relationships with teachers and parents and peers, because of a caring couple with a foundation. Seniors are building genetic core strength and improving their health with personal trainers, at no cost. At risk children are given hope for their futures by having flight training at local airports after school. A “green” foundation is building environmentally sound homes for low income families. Dogs and cats who are companion animals to seniors are being transported and neutered for free because of a foundation. In Kansas, an abandoned barn became the location for a flagship after-school program. Another foundation assists the elderly who are short of cash for groceries, utility bills and necessary prescriptions.
The list is almost endless. You can add your vision and success to it.
“The secret to success is to own nothing, but control everything.” Nelson Rockefeller
The IRS says that last year $300 billion was given to charities by private foundations. With fewer than 100,000 private foundations, 1 family in 1000 used this financial tool to contribute an average of $3000 to charitable purposes and the other 999 families paid taxes and/or made small or zero contributions. Which group would you prefer to be in?
“Tax avoidance: avoid the creation of a tax liability in the first place. Actions here are within the law. Tax evasion: taking measures to evade taxes that are due; this is not legal.” Wikipedia Encyclopedia
Every year, approximately $3.1 billion is available in grant monies, from public and private and corporate sources…..and is not given away. Why? One reason is that no one applies to the givers properly with a supportable purpose combined with a legal structure. Identify your passion and focus, write it down, then birth its status as a 501(c)(3) private foundation entity, and those monies can be available to your foundation to help you fulfill your vision. This concept is perfect for those who cannot sufficiently self-fund their foundation’s purpose and activities.
“You are what you contribute.” Liza Minelli, quoting her mother, Judy Garland
Private Charitable Family Foundations’ FAQs
Q: How does a private charitable foundation lower my personal tax liability?
A: You as Founder can contribute up to 30% of your “adjusted gross income” which lowers the amount your tax is figured on and also lowers the %. This can be in cash or in personally owned assets. For example, a W-2 income of $100,000 can create a $28,000 tax liability; donating $30,000 to your foundation reduces that liability to $19,600, and saves you $8,400. For operating foundations 50% can be donated; in the same example as above, a $50,000 donation saves you even more. Results are dramatic for all tax brackets.
Q: Does my foundation have a required annual payout instead of paying taxes?
A: Yes. “Qualified Distributions” equal 5% of the average value of invested assets. (This 5% includes a 1-2% excise tax.) Distributions are paid out for administration and expenses, and to charitable activities of your choice.
Q: What taxes is my foundation exempt from?
A: Federal income tax, capital gains tax, estate and gift taxes. It also is exempt from sales tax on purchases it makes, and property taxes in some counties.
Q: You mean that it pays no capital gains on real estate or investments? Ever?
Q: How does my foundation get funded?
A: Your foundation receives donations of income, investments, assets, collectibles, real estate, etc., from you or any Trustee or any outside source. And you can hold fund-raisers. Grants also are available for charitable purposes. Your foundation does not have to be self-funded.
Q: Can anyone do this?
A: Yes. There is no minimum funding level. All you need is a charitable purpose(s).
Q: How complicated is it to manage?
A: It is very simple. There are 8 rules to follow, what to do and what not to do. These are explained in the Workshop that is provided to you.
Q: Why is there a Workshop?
A: Trustees, and the Founder who normally is also a Trustee, need to know the few basic rules so that they run the foundation responsibly.
Q: Where are Workshops held?
A: In Southern California and other areas around the country.
Q: Who has control and makes the decisions for the foundation?
A: You and the Board of Trustees which you appoint.
Q: How do additional Trustees get added to the Board?
A: The existing Board appoints them, with their acceptance, agreement and commitment to the foundation’s mission.
Q: What about probate? Is it a concern for a foundation?
A: Never. When a Trustee retires or dies, the foundation continues on exactly the same with the remaining Trustees on the Board in control. It can go on forever.
Q: Can I involve my children or grandchildren?
A: Yes! You can create a Junior Board of Trustees, appoint the ones you choose, and they will be in training but do not vote. It is a perfect way to pass your values and your vision to them.
Q: Can this serve as an estate plan?
A: Yes. It is very positive. It gets the family together for a common and charitable purpose, makes discussions regarding death less depressing, and protects assets.
Q: What is meant by my foundation being an “exit strategy”?
A: Provided action is taken in a timely manner, future potential tax problems are never created and potential tax liabilities disappear.
Q: Are there two tax systems?
A: Yes. A foundation is a “tax system for the informed” in place of “THE tax system for the uninformed”.
Q: Have people used this tool to create a new career?
A: Yes! You can create your perfect workday, become a good steward and make a difference.
Q: Can I receive a salary or other benefits?
A: Yes, provided that you are actively carrying out the charitable purpose(s) of your foundation. It can provide you your health insurance, transportation and other necessities so that you can function in your capacity on the Board of Trustees. You can create a secure and prosperous retirement plan.
Q: How do I know this is real?
A: Most of us have heard of private foundations but assumed that this financial tool was available only to the super wealthy, so we mentally discarded it for ourselves. Right? It is a tax exempt charity in total compliance with IRS Section 501(c)(3) Exempt Organizations. You can go to www.irs.gov/eo and click on “Private Foundations”. There is no one place in which to find all the information. It is sprinkled all through the IRS exempt organizations’ literature, which makes learning about it more difficult. We have collected all that information so that you don’t have to.
“Everyone can give because everyone can serve. ” Martin Luther King Jr.
Your Foundation Comes with Many Benefits
In the Workshop, you will:
Experience the most effective and cost-efficient education program available for the establishment of a Private Foundation.
Understand ownership vs. stewardship.
Learn to function with changing circumstances using a family foundation.
Receive practical suggestions, guidance and knowledge necessary to operate a foundation.
Learn how to self-direct and self-manage tax dollars, because you control how your tax dollars can make a difference instead of just disappearing.
Receive a practical overview of the “do’s” and “don’ts” of a family foundation (IRC 4941-4945).
Have the opportunity to consider both grant-making and grant-receiving.
Create and begin to live your family’s mission.
Participate with your entire family or friends; no blood relationship is required.
Experience with your family and/or friends the true meaning of: “Doing Well” by “Doing Good”.
Become conversant with the range of options available only to private foundations.
Receive the tools needed to be successful in your charitable goals.
Become a member of a fast-growing grant-making community.
Gain access to legal, tax and financial providers that are leaders in their fields.
Receive a complete set of all compliance documents necessary to obtain tax exempt status, ready for submission to the IRS (upon full payment for your Foundation).
Benefit from a lifetime entitlement to audit EPAJS’ Family Foundation Workshop free of charge (beginning with your third Workshop there may be a small charge for incidentals).
“Could it be that our greatest fear is not that we might be inadequate, but that we are powerful beyond measure?” Marianne Williamson
We empower individuals and families to act on their vision and passion, to make a difference. A private foundation provides the perfect opportunity to move from success and achievement and sufficiency, to meaning and significance.
Live your dream and leave a legacy.
Learn more about private foundations:
Know that we do not sell, give away, or give out, or use your e.mail/phone number or name to anyone else!