The Directed Family Foundation

A Directed Family Foundation, also known as a supporting organization, offers substantial control and improved tax benefits over a private foundation. It is recognized as a qualified public charity under IRS sections 501(c)(3) and 509(a)(3). With careful design, this family foundation offers great control and flexibility if the donor is comfortable running it as a separate organization. Families planning to use this model of a foundation should retain qualified tax counsel (CPA and attorney) that specialize in this arena.

The supporting organization has several benefits. First, it does have all of the public charity benefits, such as the higher tax deductions and the lack of the private foundation restrictions. The latter feature enables the supporting organization to be run at very reasonable expense without a significant administrative overhead. However, because it is a stand-alone charity, it is required to file separate tax returns. Both the donor and other members of the family may be appointed to the board of directors.

At inception of the Directed Family Foundation, the donor must identify the charities or causes that are to be supported. Once the charities are chosen, there is generally no future deviation allowed. To increase the grant-making flexibility of the supporting organization, it is advisable to include a charitable foundations, such as Family Legacy Fund, as one of the supported charities. This allows the directed family foundation to make gifts to organizations that are not originally listed in the articles of incorporation.

If Family Legacy Fund is named as one of the supported charities, the Directed Family Foundation may take advantage of Family Legacy Fund’s administration and compliance services (including the execution of the required tax reports for nonprofit organizations) for a modest fee.

For more information on Directed Family Foundations, please call Family Legacy Fund at 510-428-3363.

* THIS IS NOT LEGAL ADVICE. ANY PROSPECTIVE DONOR SHOULD SEEK THE ADVICE OF A QUALIFIED LEGAL, ESTATE AND/OR TAX PROFESSIONAL TO DETERMINE THE CONSEQUENCES OF HIS/HER GIFT.