A Privation Foundation is established, in large part, to help protect one’s estate and maximize the impact of charitable giving. In conjunction with the giving season, McManus & Associates, a top-rated estate planning law firm celebrating 25 years of success, outlined “10 Precautions for Protecting the Benefits of Your Private Foundation,” as part of its Educational Focus Series. To listen to the conference call led by the firm’s founder John O. McManus, go tohttp://bit.ly/2AnjdGU.
“By making gifts from your Private Foundation to charities in increments over time, you can extend your influence over the ongoing use of your gifts,” explained McManus. “But while there are many advantages of Private Foundations, there are also often-overlooked pitfalls, of which you should be aware.”
10 Precautions for Protecting the Benefits of Your Private Foundation
1. Use Caution when Compensating Family Members through the Foundation
A. Certain transactions between a Foundation and a disqualified person are subject to self-dealing rules. The Internal Revenue Code imposes a 10% excise tax on the disqualified person for acts of self-dealing between a Private Foundation and the disqualified person.
B. Be aware of the acts that are considered self-dealing between a Private Foundation and a disqualified person in order to avoid penalties.
C. There are some exceptions to these self-dealing prohibitions: The Foundation can pay compensation to a disqualified person for personal services that are reasonable and necessary to carry out the Foundation’s purpose; and if the total amount of the compensation is reasonable.
2. Don’t Fall into the Ticketing and Fundraising Event Trap
A. As a general rule, a disqualified person cannot use a ticket to a charitable event receiving support from the Foundation. This includes attendance by a guest (such as a spouse) of a trustee of the Foundation.
B. A trustee can only attend a charitable event if he/she has responsibility for evaluating and reviewing the activities of the Foundation.
3. Follow Guidelines for Sharing Office Space, Equipment and Personnel with a Family Office
4. Avoid Legally Binding Pledges
5. Identify Any Benefits from Joint Investments and Co-Ownership
6. Promptly Address Misuse of Foundation Income or Assets
7. A Key Benefit of Seeking Legal Counsel Advice
8. Beware the Penalties of Self-Dealing
9. Exercise Expenditure Responsibility
10. Protect the Founder’s Mission
For trusted advice on creating or managing a Private Foundation, call McManus & Associates at 908-898-0100. Learn more about the award-winning firm atwww.mcmanuslegal.com.
About McManus & Associates
Twenty-five years ago, McManus & Associates was founded to deliver the highest quality estate planning services that the largest firms promise with the more intimate, personalized relationships that a boutique firm can offer. Since that time, some of the most prominent families in finance, media, academia and medicine — both domestic and international — have relied on the firm to serve as their advisor in wealth and family mission planning.
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