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Questions to consider
when creating a family fund or foundation*
What type of tax deductions do you wish to take?
Under federal IRS regulations, you may only deduct donations to a
private foundation of up to 20% of your Adjusted Gross Income for gifts
of property, or 30% for cash gifts.
Gifts to a public charity - including to a donor-advised fund or
supporting foundation at the Community Foundation- are deductible at fair market value, up
to 30% of your Adjusted Gross Income for gifts of property, or 50% for
cash contributions.
How much time and money do you want to spend on administration?
With a donor-advised fund, the Community Foundation takes care of the paperwork and
administration. With a supporting foundation, the Community Foundation provides staff
assistance for administration, grantmaking, and investment expertise.
Private foundations have burdensome administrative requirements which
you must meet.
Do you want to spend time investing the foundation's assets?
Donor-advised funds require no time be spent on investments.
Supporting foundations can create their own plan for investments and
grantmaking, but the Community Foundation appoints 51% of the board of
the supporting foundation.
A private foundation has the maximum control over investments, however
economies of scale may not be realized to the same extent as if the funds
were invested with the Community Foundation's larger asset pool.
Do you want to pay excise taxes?
Supporting foundations and donor-advised funds at the Community
Foundation pay no excise taxes. Private foundations must pay
1% to 2% of their investment income to the government in excise taxes.
Do you want to retain business holdings?
Private foundations must divest business holdings, such as closely held
stock, within five years, or pay an excise tax.
The board of each supporting foundation at the Community Foundation may create its own
investment strategies and may choose to hold assets that do not conform to
the Community Foundation's investment strategy for its endowment.
Donor-advised funds divest donated assets and funds are invested in one
of the Community Foundation's investment pools.
Do you want to file IRS tax forms every year?
With a donor-advised fund at the Community Foundation, no
tax return is required.
For supporting foundations, the Community Foundation staff prepares
the supporting foundation's tax return for you.
Private foundations are required to file an IRS tax return (form 990-PF)
each year and must oversee the record-keeping, accounting, and other
administrative functions.
Are you planning to involve future generations of your family in the
foundation?
A private foundation or a supporting foundation can have multiple future
generations continue the foundation's work.
With a donor-advised fund, you may name one generation of successor
advisor(s) to the fund. Often donors, also choose a particular
field-of-interest to continue their charitable goals after their death.
Do you want the IRS to dictate how many grants you make each year?
Donor-advised funds and supporting foundations at the Community
Foundation have no requirements on how many grants or what
percentage of their assets must be donated to charity each year.
Private foundations are required under the IRS code to grant 5% of their
assets to qualified public charities. (This 5% may include up to 2% of
their payout that can be spent on staff, record-keeping, and other
administrative requirements.)
How quickly do you need to get started?
A private foundation may take months to create.
A donor-advised fund at the
Community Foundation can be
created in less than a day and the establishing a
fund form is available here
What
level of privacy do you want?
At the Community Foundation you may
choose to be remain anonymous to the general public and be only known to
appropriate staff members. When recommending grants to nonprofits you
decide to identify your fund or remain anonymous.
A private foundation is anything but private. The IRS tax return (form
990-PF) is a matter of public record and information on trustees,
employees, gifts, investments, and grantmaking is accessible at many
internet web sites.
A
note on recognition
The Community Foundation wants
you to receive the appropriate level of recognition. There are several
forms ranging from anonymity to feature articles in the local media. Our
Annual Report and web site highlight a handful of funds and lists all
named funds unless you request otherwise.
*The Princeton Area Community Foundation is not engaged
in rendering legal or tax advice. This information is a service to
provide general information about charitable gift planning. Potential
donors should rely strongly on their own advisors.
Princeton Area Community
Foundation
15 Princess Road, Lawrenceville, NJ 08648 tel: 609.219.1800 fax:
609.219.1850
info@pacf.org
Nancy W. Kieling, President and Executive
Director
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