According to an often-repeated proverb, the meaning of life is found in “planting trees under whose shade you do not plan to sit.” Everyone dreams of leaving a legacy — something that outlasts you but brings value to those who come after you. 

One way to leave a legacy is to start your own philanthropic foundation. If this is one of your long-term goals for leaving a legacy, there are many considerations you’ll need to review before moving forward. 

Think about the institutions that have impacted your life the most. Philanthropy often means giving back to these organizations or donating to organizations that align with your core values.

Many people already have a small list of organizations and institutions they support in some capacity. You may even give small gifts to a dozen different nonprofit organizations or more. But there might be one or two organizations or causes that you care about the most, giving large gifts of more than $10,000 per year.

That typically means that you’re already involved in some type of philanthropic work. In fact, if you serve on the board of a nonprofit, you’re expected to be a major donor. But even casual donors are still involved in monetary contributions. 

The point is that starting a foundation of your own might be a continuation or reflection of your current commitments. In a very real sense, you’re already living your legacy and simply need to translate your present commitments into long-term sustainability.

When to Consider Your Own Foundation

Your legacy can be as simple as leaving another gift to the organization of your choice or encouraging your family and friends to do the same. But you might also consider setting up a foundation of your own. Here are some of the reasons you might start a foundation:

You Want to Communicate Your Values

How you use your checkbook says a lot about your character. As you get closer to your golden years, you might be thinking about what you want to leave behind and how to express those values. 

Philanthropy can be a tangible way to live out those values, and a foundation can ensure that you keep “speaking” into the world for generations to come.

You Have Enough Money to Start Your Own Foundation

To start a foundation, you need at least $500,000, though as much as $3 to $5 million is ideal if you’re employing private staff. If you have the wealth to start a foundation of your own, this can be a great way to put that money to ongoing use.

You Want Your Family Involved

A foundation can be a great way to encourage your family to contribute to a meaningful cause. If you have the wealth, you can pay family members a salary to encourage their involvement. 

Alternatively, you can invite your family into the actual process. Your children, for example, may have specific social concerns that your foundation might address. Organizing your foundation around these needs can further encourage their involvement and ensure that you’re meeting a genuine, real-world need.

You Value Events and Fundraising

Do you want others to contribute to your foundation? If so, you can encourage such participation through events and fundraising. If these are appealing options, then starting a foundation can be a solid choice.

How to Start Your Own Foundation

To start a foundation, you’ll need to work with an attorney. Your legal counsel can help you comply with the guidelines and navigate the expenses. 

It’s also important to work with a board of directors with whom you’ll hold meetings and conduct other logistical matters. You’ll need to have a system in place for filing tax returns and maintaining financial transparency.

Are There Any Barriers to Starting a Foundation?

Currently, charitable donations are tax-deductible. Most donors give to support the charity, not necessarily for the minor tax break. Still, if this rule were ever changed, it could deter some people from giving or cause them to reconsider the size of their donation.

Develop Your Philanthropic Strategy

We understand the importance of leaving a legacy for others to follow. That’s why we aim to help you develop a practical philanthropic strategy that aligns with your deepest values. We would be honored to help you create a plan to leave the legacy you’ve always dreamed of. When you’re ready, connect with us to schedule a complimentary, no obligation, consultation.

Financial Professionals do not provide specific tax/legal advice and this information should not be considered as such.  You should always consult your tax/legal advisor regarding your own specific tax/legal situation. 4961852/DOFU 9-2022