When your values and financial circumstances lead you toward active involvement in charitable giving, you may wish to consider a private foundation. A private foundation combines more control than other charitable vehicles, tax benefits, and an opportunity to bring your family together in a way to make a real difference in the world, while helping you meet your charitable goals.

Is a private foundation right for you?

A private foundation may be right for you if you want to:

• Take an active role in philanthropy
• Maintain control over investment and grant decisions
• Receive immediate tax benefits
• Support charitable causes you care about on your own timetable
• Support grants to individuals and scholarship grants
• Build a public legacy through a named giving vehicle
• Share the philanthropic process with family members and future generations

Tax benefits

The tax benefits of a private foundation:

• Donors may be eligible to take an immediate tax deduction: For cash gifts – up to 30% of Adjusted Gross Income (AGI); for long-term appreciated securities – up to 20% of AGI, generally deductible at fair market value (FMV); and up to 20% of AGI for other long-term appreciated assets, generally deductible at cost basis.¹ Deductions in excess of these limitations may be carried forward for the succeeding five tax years.
• Gifts, if invested, have the potential to grow until distributed as grants, generally free from income and capital gains tax on future appreciation
• Contributions are removed from the donor's estate and therefore are not generally included for federal and state estate tax purposes

Rules and regulations

Not surprisingly, the government carefully regulates private foundations as a class to ensure they are entitled to their tax-exempt status. These regulatory requirements, complying with which may be time-consuming and expensive, include:

• Extensive paperwork to establish a private foundation and attain its tax-exempt status
• Annual filing of IRS Form 990-PF, the the annual information return filed with the IRS by private foundations
• Annual distribution minimums of at least 5% of net assets each year, and documentation of compliance with this distribution requirement
• Regulatory requirements connected with certain forms of grantmaking, such as scholarships and grants to non-U.S. organizations
• Excise tax on investment income
• Prohibitions on certain activities, including self-dealing and jeopardy investments
• The burden of fulfilling all of these requirements has led many people to seek support for the day-to-day administrative responsibilities.

You have many goals for your charitable giving and a private foundation can help you achieve them. Fidelity Private Foundation Services helps you to form a private foundation quickly and manage it easily.

Combining with other vehicles

For some donors, combining a private foundation with other charitable vehicles, such as charitable remainder and charitable lead trusts, can offer additional benefits. Trusts used for this purpose are called split interest vehicles, because the benefits they provide are "split" or divided between the donor and a charity. There are many sophisticated options for utilizing split interest trusts. Three of the most common options are:

• Pooled Income Fund
• Charitable Remainder Trust
• Charitable Lead Trust

In some cases, added benefits can be realized by combining a Donor Advised Fund with a private foundation. For example:

• If you are interested in running a private foundation during your lifetime, but think a donor advised fund would be more appropriate for your family members to manage after your death, you might consider plans to transfer your foundation's assets to a donor advised fund as part of your estate plan.
• The ability to support charitable causes you care about on your own timetable
• The ability to build a public legacy through a named giving vehicle
• The ability to share the philanthropic process with family members and future generations

These are just a few examples of how your private foundation can be combined with other giving vehicles in accordance with your personal goals and needs. Explore other options with the help of your financial advisor.

Speak with a representative: 866-273-2130