After experiencing success in the business world, many families decide to establish a family foundation to give back to the community or to a specific organization that is near and dear to their hearts. In addition to favorable tax benefits, family foundations can engage younger family members in philanthropy and establish a legacy of giving in your family for generations to come.
As with many large undertakings, getting started can be the hardest part. Creating such an entity is a highly detailed process. Ensuring that one is abiding by IRS regulations, in addition to those imposed at the state and local levels, can be a daunting task. Creating a foundation may seem overwhelming at first, but a highly-motivated family will not anguish over the hurdles, but rather take pleasure in all the benefits.
Here are five strategies for building a successful family foundation to help you create your family’s legacy of philanthropy:
- Find Your Focus. What is your niche? What is the passion of your family? Are there other organizations already addressing the issues that are important to you? Are there specific types of work that you wish to accomplish? There are many questions you should ask that will help you target your foundation’s work and select deserving beneficiaries.
- Create a Plan. Even before you apply for tax-exempt status, establish a strategic plan with a fluid document of your organization’s goals. Obtain feedback from advisors, and modify your plan as needed. In the development of your plan, include specific, measurable goals so that you can establish accountability and track your progress against a timeline. Constant evaluation and communication are key.
- Bring in the Experts. It is important that you immediately find the right team of legal, financial, and organizational experts. These professionals can guide you through the detailed process of forming your foundation and applying for tax-exempt status.
Many details are needed to apply for tax exemption with the Internal Revenue Service, and the process requires expert tax, financial, and legal knowledge. The initial process includes providing a budget that will supply an estimate of what the first several years of your operations may look like. Additionally, the organization’s mission must be defined and explained. The right advisors will go beyond simple forms and checklists to provide insightful guidance that will help you succeed.
- Develop Your Team. In addition to your legal and financial advisors, it is also important to establish your management team early on. Recruit your initial Board of Directors – committed individuals who are willing to initially invest extra time to help you establish the foundation. They will be your main supporters and cheerleaders.
When developing your team, include individuals from a variety of backgrounds or disciplines. This will allow for greater diversity of input into your organization. Your family should gather a full complement of individuals with unique talents and expertise who will step into leadership roles and assist in key areas, such as finance, advocacy, and development.
- Raise Awareness. Once the framework is established, begin an outreach program into the community and talk to the media to help generate public support for your work and your mission. It is also possible to partner with another nonprofit organization that has a similar mission or hosts similar initiatives. Talk with the leaders of that organization to see if you can work together to fund certain projects or create an innovative program.
Additionally, register with a foundation database or create a website to recruit prospective grantee organizations whose programs reflect your giving priorities. Many family foundations preselect the organizations which they fund. Others create requests for proposals which they post online.
Finally, have fun! Your family is establishing a wonderful tool to help others and give back to the very community that has allowed you to prosper. Make the most out of the experience and reap the rewards of your generosity and planning. With a detailed plan, the right advisors, and a lot of dedication and enthusiasm, your family can establish a successful foundation that will provide a legacy of giving for years to come.
If you have any questions regarding your family foundation or beginning one, fill in the form below and a member of our team will be in touch.
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