Establishing a private foundation may be the right estate planning vehicle if you want to create a family legacy of charitable giving. You may be able to effectively establish a foundation with an initial contribution as low as $500,000.
A private foundation is a tax-exempt entity that’s typically structured as a not-for-profit trust or corporation and established to accept charitable contributions. It’s private because it doesn’t solicit public contributions. One of its primary benefits is that it allows you to control your giving. As a member of the foundation’s board of directors, you manage the foundation’s assets and direct grants to charities.
Contributions to a private foundation are deductible for federal income tax purposes. You can deduct cash contributions to a non-operating foundation (the most common type) up to 30% of your adjusted gross income (AGI). For noncash contributions, the limit typically is 20% of AGI. The deduction for any contribution in excess of AGI limits may be carried forward and used for up to five years.