Many families establish private foundations to create a lasting charitable legacy. Foundations can support important causes, bring generations together, and give families an opportunity to make a meaningful difference.
But families change.
Children and grandchildren may live across the country. Board meetings become harder to coordinate. Administrative responsibilities grow. Tax filings, investment oversight, recordkeeping, and compliance can begin to take more time than anyone anticipated.
That’s when it may be worth asking:
Is our private foundation still the best way to accomplish our charitable goals?
There’s no one-size-fits-all answer. But if your family is considering a change, here are five things to think about.
1. Be realistic about what’s working—and what isn’t.
Is the foundation still helping your family accomplish what you hoped it would?
Are family members actively involved, or has the responsibility fallen to one or two people?
Sometimes the foundation hasn’t failed. Your family’s needs have simply changed.
2. Consult your specialists.
Talk with your attorney, CPA, and financial advisors about the legal, tax, and financial considerations involved in a transition.
They can help you evaluate your options and the factors that may affect your family’s particular situation. Our Alternative to Private Foundations document may be helpful.
Bring the Community Foundation into the conversation early, too. We can explain how a donor advised fund works, answer questions about the transition, and explore ways to preserve the charitable purpose and identity your family has built.
In many cases, a donor advised fund can even continue under a familiar name.
3. Identify the decision-makers.
Who should help guide the family’s charitable giving?
A donor advised fund can provide flexibility to involve family members today and designate successor advisors for future generations.
In many ways, these advisors serve a role similar to a private foundation’s board.
4. Move to implementation.
If your family decides to transition, the process can often be handled efficiently with careful planning.
Generally, the private foundation distributes its remaining assets to the Community Foundation to establish or add to a donor advised fund after reserving enough to cover final accounting, legal, tax preparation, and other closing expenses.
Your advisors can then help complete the foundation’s final tax return and required state filings.
5. Carry on with your good work!
Once the transition is complete, your family can continue supporting the organizations and causes you care about. Often with less administrative responsibility!
Instead of spending as much time on paperwork and compliance, you can spend more time doing what inspired the foundation in the first place: making a difference.
Every family’s situation is unique, and transitioning from a private foundation to a donor advised fund is an important decision.
If you’re wondering whether it might be the right fit for your family, please reach out! We’d be delighted to visit with you and your advisors. We’re here to help you explore your options and continue building the charitable legacy you’ve worked so hard to create.
