Private Foundation Options
Some clients may come to you with the belief that a private foundation provides their only option for long-term involvement with assets they set aside for charitable purposes. In reality, a named fund or supporting organization at a community foundation offers numerous advantages to these clients, provides real ways for them to stay engaged in giving and avoids many of the hassles of private foundation management.
Explore the information in this section to look at these charitable giving options. Feel free to print any of these materials for discussions with your client.
We welcome the opportunity to consult with you and any clients who would like to discuss the advantages and disadvantages of each approach. Our desire is to help you find the solution that works best for your client. If you have any questions that have not been answered in this section, please click here to contact us for more information.
Some of your clients may have an existing private foundation. In this case, they may find that there are several benefits to transferring it to an advised fund with the community foundation. Through a simple transfer process, your client may be able to avoid some of the hassles (and costs) of private foundation management.
There are two options to consider: the donor advised fund option and the supporting organization option. Each approach allows your clients to remain involved in grant making, if that is their desire. At the same time they will be able to ensure that their intent, name and pattern of charitable giving are maintained—in perpetuity if they wish.
The Donor Advised Fund Option
Assets of a private foundation may be used to establish a donor advised fund, unrestricted fund, field of interest fund, scholarship fund or designated fund. Depending on the type of fund that is established, the private foundation's Board of Directors often stays involved in setting grant-making priorities, advising on grant awards and assessing grant success.
The Supporting Organization Option
Generally, it is possible for a private foundation with $5 million in assets, or the potential to reach $5 million in the future, to become a supporting organization of a community foundation. Besides easing the administrative and cost burdens of managing a private foundation, transferring it to a community foundation permits the private foundation to take advantage of many aspects of our public charity status.
Section 507 of the Internal Revenue Code permits termination of a private foundation in either trust or corporate form with distribution of its assets to a public charity. The two primary requirements for the termination of a private foundation are that the private foundation must distribute all of its net assets to one or more tax-exempt organizations and that each organization has been in existence for a continuous period of at least five years preceding the distribution. Our community foundation fulfills both of these requirements and the private foundation's assets typically form a permanent donor advised fund under a similar name.
The supporting organization option requires careful consideration by your client and our Board of Directors. For further information on this option, or to discuss a particular client's needs, contact Jim Williamson at 860.229.6018 x306.