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Should I Consider a Family Foundation?
What attracts most families to set up a family foundation is that it allows control of the timing of both charitable deductions from personal income and subsequent annual
distributions to public charities. In addition, the foundation continues in perpetuity (indefinitely) and the family maintains control. When funds are invested well, the fund will continue to
grow despite payouts, the minimum of which is 5% per year of the fair market value, excluding assets used in carrying out the foundation.
A family foundation can be set up either as a
corporation or a trust. A corporation has the advantage of more indemnity protection and operates as a regular business entity. The documents required are Articles of Incorporation and By
Laws. Also included is a Mission Statement. It is wise to copy the general language of the IRS for these. This doesn't mean you have to do all these things, but it is good to have them in
there. Family members serve on the Board of Directors which conducts the business of the foundation. A family trust would have a Trust Agreement and a Board of Trustees.
Usually such
foundations are set up by the older members of a family, but it is well to include and gradually increase the numbers and participation of the younger people as well. This gives the older
generation a chance to share their vision with their heirs and the work of the foundation itself gives a good grounding in money management and stewardship to subsequent generations.
A family foundation is a good platform for the family to think through their passions and causes. Arriving at a Mission Statement which adequately expresses the desire of the family to make a
difference in the world is a good beginning. This can then be broken down into long term and short term mission statements. There can be separate mission statements to accommodate a variety
of interest groups within the family. Care should be taken, however, to keep the focus sufficiently broad so as not to limit future generations as needs and conditions change. An excellent
website to help a family get started on this venture is www.guidestar.org.
From a presentation by Jane Siebels-Kilnes and Barbara Houser at the Royal Treasure Symposium, February, 2000
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