Podcast & Whitepaper: How to Start a Private Foundation: Key Considerations and Steps
By Allen Mast, First Vice President, SunTrust Private Foundation Practice
Share current LOB: wealth-management
Host: If you seek more control over your charitable giving, establishing a private foundation may be your best philanthropic option. A private foundation can help you make a long-term impact on your community and your family can control it in perpetuity.
Host: Here, Allen Mast, First Vice President of SunTrust Private Foundation Practice Group, talks about benefits that drive people to start their own foundations and some of the challenges of establishing this type of charitable vehicle.
Mast: First, a private foundation enables a donor to establish a separate philanthropic entity that can make a significant charitable impact in perpetuity during the donor's lifetime and far beyond.
Second and most importantly, a private foundation enables a donor to retain control of the foundation's charitable purpose, the grant allocation process where contributions go, the foundation's governance structure, who will serve on the board of directors or the board of trustees, the foundation's investments, and the name of the foundation.
Host: Private foundations also can bring significant tax benefits, yet people typically don't start foundations for tax reasons. Beyond the benefits, Mast says, there are limitations to this form of giving.
Mast: Of all the charitable vehicles that are available to a donor, private foundations are the most highly regulated. Some of those regulations include restrictions on financial transactions between a private foundation and its insider, such as board members; rules governing investments; restrictions on types of entities that a private foundation can support; minimum annual charitable distribution requirements; and private foundations must pay an annual excise tax on that investment income.
And it's essential for foundation fiduciaries—for example, board members—to become really knowledgeable about, and stay up to date with, private foundation rules. And this is where a professional private foundation adviser can play an important role.
Host: In addition to regulatory issues, it's important to consider the costs of running a private foundation.
Mast: The start-up costs include paying an attorney, tax and financial professionals to actually establish the foundation and set it up into operation. And there are also costs for preparing annual, federal, and state tax returns and complying with state trust and corporate legal requirements.
Host: While every charitable vehicle is unique, Mast says you can follow best practices in establishing your private foundation.
Mast: First, it's important to gather together a group of trusted advisers, such as a tax attorney, financial professionals, and a philanthropic adviser all with expertise in private foundation rules and regulatory requirements.
Second, once the foundation is formally established in either trust or corporate form, you'll need to create a board of directors or trustees, identify who will serve on the board, for how long, how the board will operate, and identify a plan for board succession.
Third, it's important to define the foundation's charitable goals, mission, and its definition of success. Fourth, it's also important to develop the process and procedures for making grants, such as a grant application form, deadlines, and the due diligence process.
And finally, it's important to have a legal professional draft the key documents by which the foundation will operate, such as the foundation's bylaws, a conflicts of interest policy, and any governing policies.
Host: The SunTrust foundations and endowments specialty practice has more than a century of experience working with not-for-profit organizations, delivering comprehensive investment advisory, administration, planned giving, trust and fiduciary services, to over 700 not-for-profit organizations.
For more information, contact Allen Mast at 404-813-9105 or at Allen.Mast@SunTrust.com. You may also visit us online at SunTrust.com/foundations.
If you’re looking to gain more control over your charitable giving, establishing a private foundation can help you reach your philanthropic goals. Allen Mast, First Vice President, SunTrust Private Foundation Practice, talks about the reasons why people choose to establish private foundations, related compliance and financial obligations, and the steps you can take to establish a private foundation.
This content is educational in nature and is not an advertisement for a loan or business solicitation. It does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
As younger generations are engaged in gift making decisions, differences can be
more apparent. In anticipation of this, it is important for families to have a conversation about succession plans and how
to pass on the tradition of giving.
A foundation board’s typical search for an investment advisor ends with one of three results. SunTrust’s Kim Krause outlines these outcomes and shares tips for streamlining the request for proposal process.
Laurie Bagley, Senior Vice President and Investment Manager, Foundations and Endowments Specialty Practice, SunTrust Bank, talks about challenges and strategies when creating an investment policy that aims to preserve intergenerational equity in perpetuity.