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Lesson · Legacy · tax

Give it away — and keep control.

A private family foundation gives you a deduction today, control over the money and its giving, and a legacy vehicle your family runs for generations.

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$240,000
60% of a $400K AGI — taxed on $160K instead

TWO FLAVORS

Operating vs. flow-through

60% of AGI in cash30% of AGI in cash
Runs real programsGrants money out only
Can take outside giftsYou and family fund it
Like a second businessLow admin lift

Key points

What you cannot do with it

✓
No personal loans
✓
No paying yourself rent
✓
No buying foundation assets
✓
No covering personal pledges
✓
Reasonable pay only
✓
Everything documented

How it works

How you actually stand one up

1
FORM AND FILENonprofit entity, then IRS Form 1023
2
SEAT THE BOARDYou, spouse, and your children
3
FUND IT BY DEC 31Deduction lands in the year you give
4
FILE 990-PF YEARLYPrivate foundations report every year

THE 5% RULE

Required annual payout

$500,000About $25,000
$1,000,000About $50,000
$2,000,000About $100,000

Key points

Why families do this

✓
Kids sit on the board
✓
Reasonable pay for real work
✓
Assets stay invested
✓
Grants outlive you
✓
Teaches money on purpose
✓
Excess deduction carries 5 years

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The Private Family Foundations field guide — one page

The strategy, the checklist, the key numbers, and links to the actual tax code. Print it, take it to your CPA. Free, no strings.

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Field guide · PDF

Private Family Foundations

Cliff notes + checklist + the law

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The law behind it

Primary sources

Verify against the source before you rely on it. This is education, not legal or tax advice.

26 U.S.C. Sec. 509 — Definition of a private foundation.law.cornell.edu/uscode/text/26/509
26 U.S.C. Sec. 170 — The charitable-contribution deduction rules that apply to gifts into the foundation.law.cornell.edu/uscode/text/26/170
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