When the wealthy express their passion for philanthropy, they often do so through family-funded and established entities, such as the Bill and Melinda Gates Foundation, the Diller-von Furstenberg Family Foundation, and the Schmidt Family Foundation.
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| Image Source: familygivingnews.org |
Why do they have to establish a family foundation just to help out charities? The answer is simple: so they can do so in a tax-efficient way while enjoying the tax benefits that donating to charities bring.
Jeremy Stahl of Jess S. Morgan & Company, Inc. explains how a family foundation works:
It is usually managed by a board of directors, usually headed by the family matriarch or patriarch, and includes family members, advisors, or anyone who is familiar with and agrees with the foundation’s philanthropic goals. It is then funded with different assets, such as cash and securities, which will then be reinvested in accordance with the board’s investment objectives. The resulting income from those investments will be used as donation to the different board-approved charities.
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| Image Source: paa-foundation.org |
As mentioned earlier, there are tax benefits to donating. These include income and estate tax benefits, wherein the donor will have tax breaks his entire life and inheritance tax benefits for his heirs when he passes away. In addition, the foundation can be a good training ground for younger family members as it can teach them about investing and the importance of charitable giving.
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| Image Source: comptonfoundation.org |
Alex von Furstenberg serves on the board of directors of the Diller-von Furstenberg Family Foundation. For more information about his philanthropic efforts, visit the foundation’s website.
