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Host: If you’re seeking more control over your charitable giving, establishing a private foundation may be an option to explore. A private foundation can help you make a long-term impact on your community, and your family can control it in perpetuity. Welcome back to the Truist Nonprofit Insights Podcast Series! We’re so happy you could join us today. Today’s special guest is Allen Mast, senior vice president of Truist Bank’s Foundations and Endowments Specialty Practice. Allen will be giving us some insight into the benefits of starting your own private foundation and some of the challenges to consider.
Allen 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 provide significant tax benefits, but people typically don't start foundations for tax reasons. Although there are benefits, Mast says, there are also 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: Although every charitable vehicle is unique, Mast says you can follow best practices to help establish 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] We hope that you enjoyed today’s podcast. We appreciate Allen’s expertise in starting up a private foundation and how it can fit in to your charitable giving strategy. We hope you consider reaching out to our team for help if you’re considering this for yourself.
This podcast was brought to you by the Truist Foundations and Endowments Specialty Practice, which has more than a century of experience working with not-for-profit organizations delivering comprehensive investment advisory, administration, planned giving, and trust and fiduciary services to over 700 not-for-profit organizations.
Get to know us better. For more information, please speak with your Truist relationship manager or advisor or visit us online at Truist.com and search for private foundations.
Statements made during this presentation are based on Truist’s beliefs and assumptions made by information currently available to management. Past performance is no guarantee of future results, neither diversification nor asset allocation ensures a profit or guarantees against a loss, and this podcast is not intended to be advice for any particular foundation or endowment. Foundations & Endowments should discuss the strategies in this presentation with their Truist advisor.
This content 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.