Turnkey Family Foundation Program

Family Foundation Format Descriptions

Structured to Suit Your Needs
A family foundation may be established in any of the following forms or structures:

• A component family foundation at the American Foundation,
• A stand-alone support organization, or
• A stand-alone private foundation.

We know that your financial security is as important as the legacy you leave to others.

The experienced staff at the American Foundation can work with your tax and financial advisors to help you determine which type of family foundation is best for you.

Format Descriptions

Component Family Foundation
(A component charitable foundation at the American Foundation)
This is highly preferred for all foundations regardless of size. A family foundation is an endowment fund created to provide permanent support for charitable organizations. Assets donated to a family foundation are invested, and a portion of the annual investment income or growth is distributed to family selected charities. This is the simplest and easiest family foundation format to operate. Cash or assets are transferred directly to the American Foundation for the particular family foundation of the donor establishing the fund. This foundation is established with a minimum deposit of $5,000.

The American Foundation is a qualified 501(c)(3) public charity. All of its family foundation components qualify for the same public charity tax status. Donors qualify for the highest tax deductions - up to 50% of AGI for contributions of cash and 30% of AGI for donations of appreciated properties. Excess deductions can be carried forward for five years. The assets are invested for maximum return and growth. The donor or the donor's designee makes recommendations for grants of all or part of the annual income and growth to qualified public charities. The donor may also recommend an investment advisor or firm to handle the investments of his/her component fund.

Unless specifically noted otherwise, all donations accompanying an application will establish this preferred and standard component family foundation with the American Foundation.

Support Organization
A support organization is a foundation formed to support a particular charity or cause. A support organization is an entirely separate entity with its own 501(c)(3) tax status.

The American Foundation has pioneered the use of support organizations as family foundations. A family foundation in this format, affiliated with the American Foundation, can provide special benefits.

This type of foundation is a public charity, so donors receive the highest tax deductions - up to 50% of AGI for contributions of cash, and 30% of AGI for donations of appreciated property. Excess deductions can be carried forward for five years. The support organization format is well suited for very large foundations where the donor wants continued hands-on administrative involvement. It can be set up as a trust or a corporation, depending on its size and nature. The American Foundation will help you determine which format is best for your situation.

The donor or selected family members can participate as members of the controlling team of trustees or board members. Special procedures are implemented in the governing documents and by-laws to ensure continued adherence to the donor's charitable mission and objectives. This type of foundation may raise money as an independent entity, apply for grants, and have its own offices, officers, employees, and programs.

Private Foundation
This approach has fallen out of favor with most tax and foundation planners and donors because of the reduced tax benefits and burdensome regulations. However, the American Foundation can "adopt," convert, and/or administer existing private foundations, bringing them into its extended Family of Foundations' operations. And, there are some circumstances that warrant the creation of a new private foundation that works in tandem, or in concert, with a family foundation at the American Foundation, such as a specially designed and formatted support organization, or corporate foundation.

This foundation type is a totally separate and distinct entity. A private foundation can be best utilized in conjunction with one of the above-listed public charity foundation formats. In addition to having increased responsibilities and liabilities, there are many tax and administrative disadvantages. There are also other restrictions and limitations that prevent the donor from achieving many tax and financial objectives that can otherwise be achieved with a family foundation under the public charity format. Deductions for gifts of cash are limited to 30% of Adjusted Gross Income, 20% for donations of appreciated property.

The American Foundation is well suited to assist you in the administration of a private foundation. The synergistic benefit of being part of the American Family of Foundations is much better than acting alone.