Most of use will never accumulate enough wealth to set up a foundation but it is a great way the rich and famous set up a family dynasty
Immediate Tax Benefits for You... you can get an immediate tax deduction for any money or property to grant to the Foundation. This deduction can equal up to 30% of your adjusted gross income (20% for appreciated property). Any income tax deduction not used in your contribution year may be carried forward over the next five years.
Estate Tax Benefits......Every dollar that you contribute to your Private Family Foundation means one less dollar that is included in your estate. Gifts that are regularly made to charities can instead be used to fund your PFF. And if you are in a higher tax bracket, that could ultimately save up to 46% in estate taxes. Best of all, you can make such contributions to a Private Family Foundation without affecting the $12,000 annual gift tax exclusion or the current $1 million Gift Tax Credit .
Required Distributions to Charities .., by law, a Private Family Foundation must distribute at least five percent (5%) of its assets each year to public charities. Let's suppose you leave $2,000,000 to your Private Family Foundation. The IRS says you must distribute at least $100,000 (or 5%) to recognized charities in order for the Foundation to qualify for its special tax advantages. And the difference between what the assets earn (e.g. 6% per year) and the mandatory payout can be put back into the Foundation.
Employment for the Family ...You may arrange for your heirs and descendants to receive salaries as "employees" of your Foundation. Simply name family members as replacement trustees to succeed you after death or resignation. Many Foundations pay their directors using the difference between their required distributions and their annual income. If your Foundation is earning 10% annually on its assets, but only paying 5% annually to charities, the difference can be distribute for legitimate expenses, including salaries for the directors of the Foundation. ...
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