Cash On The Blog

It can be challenging to integrate vision and values into strategic planning. But it’s also very rewarding. In a previous article, I described an example where “Dave” started a foundation to successfully integrate his values while resolving a major financial challenge.

Read on to discover the details and how exactly starting a private foundation was instrumental in providing the solution, and may provide a solution for your wealth planning challenges as well.

There are several key factors that make it work:

A private foundation is essentially a corporation which, once it is completely set up, will be able to get a tax-exempt status. In addition, the foundation’s corporate form also limits liability to the founders and ensures its longevity. Moreover, the founders can control the assets inside the private foundation by becoming the directors. All this results in many benefits for the family, including the following:

1. Dollar-for-dollar, there may be income tax deductions for gifts made to the foundation (up to certain limitations).

2. There are no capital gains on the sale of appreciated assets gifted to the foundation.

3. The family benefits by receiving salaries and other corporate reimbursements.

4. As with any corporation, the foundation is perpetual and continues to exist well beyond the lives of the original founders.

5. Any assets gifted to the entity are no longer part of your estate.
The foundation also provides significant additional benefits, particularly as it relates to your lifestyle. For example, while you could take compensation from the foundation in the form of a salary, you could also take your compensation in the form of fringe benefits (medical, dental, welfare benefits and so on). You could even elect to take compensation in the form of reimbursements for foundation-related activities.

Among the possibilities are so-called due diligence trips. Because you are responsible for proper evaluation of any charity and/or cause you decide to support, personal visits might be advised. With proper documentation (as in any business), you could be legitimately reimbursed for any these expenses you incur during these trips.

About the Author

I’m not your typical financial advisor. Sure, I have all the official credentials and the success stories to prove my mettle. But my vision of what I do for my clients goes way beyond the traditional stuff.