The GREATEST Tax Benefit Of Creating A Family Foundation

The beautiful part about foundations, guys, is that you technically don't own them. We're talking about a family foundation, not a public charity under this circumstance, right? You're talking about, hey, I'm setting something up that's going to be a giving organization. Are you using it as both? Well, it can be both because you know, we work with a lot of nonprofit organizations and a lot of clients who use the term foundation. Their whole family is part of the foundation. But they're actually

public charities. So they could be a public charity. They could be a private foundation. You know, it doesn't really make a difference what you're going to be. What matters is you will be a 501c3. And what we want to advise the clients is what's going to be the best thing for you, considering what you want to do in terms of your activities. So we're kind of looking at your goals and your objectives, and then we're going to recommend exactly how it should be structured to make it easy on you, bec

ause the only thing that they want to do, and we've heard this time and time again, the only thing they want to do is do charitable good, do a charitable, you know, serve a charitable purpose and just go out there and do the work. They don't want to have to deal with any of the administrative or the paperwork that's going to be involved in it. We want to do it for them, but we want to make it easy on them as well. So that's kind of our goal and our objective with it, never working with the clien

ts. Well, let's dove into some of the benefits. Before I do, I want to do the 10,000 foot view that whenever we look at these things, we look at it from an asset protection attack standpoint and a legacy planning. This actually checks all three boxes. And I know we're going to focus primarily on the tax benefits because they're so massive. But the beautiful part about foundations, guys, is that you technically don't own them, which means they can't be taken away from you. And that's and there's

a whole variety of reasons and creams going to get into. I think we're going to focus on nine benefits cream, I think. I think that's the that's the magic number for today. But but they really are quite a phenomenal piece that a lot of folks think it's the realm of only the wealthy. Do you think that's true? Cream. Do you think that only rich people use foundations or do you think that there's a place for it for everyday Americans to know? We've seen all you know, it's all shapes and sizes. It's

not just for the wealthy. I think once upon a time, especially when I started working out and even when I was with the IRS, number one, the private foundations seemed to be for the wealthy, but the public charities seemed to be for a large group. They were primarily wealthy people as well. But I've noticed, you know, over the years, especially over the last 15 years, seeing thousand organizations. That's not the case at all. Certainly the ones that are at the top and the ones that you hear abou

t the most are the wealthiest ones that, you know, we're over a million and a half nonprofit organizations. So it's not just the Bill and Melinda Gates Foundation. There are a million there are over a million other organizations. And they're just, you know, many of them in terms of the size and the the funding that they receive. It's all over the place. And the founders and the donors that are part of it are not wealthy individuals. It's just those who have a passion for what they want to do. Th

ey've had a dream of doing this and wanted to carry something out. So they've decided this is what they want to do by setting up a nonprofit and carrying out those charitable missions. Well, let's let's talk about the benefits. And do you have a list there? Yeah. Let let let's knock out what what are the big benefits? Let's go over number one. Obviously, the biggest and the best. You know, the most important for many is that it does reduce your taxable income. So, you know, obviously, if you hav

e adjusted gross income, you're going to probably have to indebt paying some taxes to the government. So by making a contribution to a501 C3 organization, then your contributions are tax deductible. So, you know, many of us are going to have to pay taxes. You have that adjusted gross income and it shows exactly, you know, it translate to what your taxable income is going to be. And for many of us, you'll have to pay taxes rather than give it to the government. Who knows what's going to happen wi

th that money? Why not give it to a charity? Give that money to a nonprofit organization, one that you have formed, one that you've set up. It can reduce your taxable income and then you can have some control over what's going to happen with the money that goes to that charitable organization. What are the limits of how much I can donate on an annual basis to my own charity? So if you give to a public charity any cash that you make a donation to, that you're limited to 60% of your adjusted gross

income if it's a public charity. And this for cash, if you make a donation to a private foundation, a cash contribution, you're limited to 30% of your adjusted gross income. Now, if you give noncash contributions, for example, stocks, it could be real estate, it could be crypto. You're limited to 30% of your adjusted gross income when you're donating to a public charity, and it's 20% if you're donating to a private foundation. Yeah. And so if somebody's been like, let's say they have a ABC Inc.

stock, you know, they maybe they got some vested stock interest from an employer. They've been holding it for 15, 20 years and now it's worth a lot more. So let's say that that, you know, you got it for 100 bucks and now it's worth a thousand. You don't have to sell that and then donate the proceeds. You could get $1,000 deduction just by donating that share right? Yeah, absolutely. So if you were to sell the stock first, you would have to pay taxes and then you would make the contribution. So

it reduces the amount that's going to go to the nonprofit organization. The flip side is you can just give it directly to the nonprofit organization. You can deduct the fair market value. So you get the benefit of it. You don't have to pay taxes on that capital gains or the appreciation of the stock. So you get to you can deduct it and the full amount and the nonprofit gets 100% of that instead of getting an amount after you've paid your taxes on it. So they get the full benefit. You also get th

e full benefit. So it works both ways.