Private Foundations vs. Family Foundation Funds
Why create a Family Foundation Fund at The Erie Community Foundation?
Family Foundation Funds provide donors and their families with an efficient and effective way to conduct their philanthropy and the opportunity to focus family energies on the true joys of philanthropy rather than the administrative burdens of maintaining a private foundation.
For a more thorough discussion about establishing your Family Foundation Fund, contact Mike Batchelor at (814) 454-0843.
Reasons for Establishing a Fund at The Erie Community Foundation rather than a Private Foundation
| Community Foundation | Private Foundation | |
|---|---|---|
| Organization | Established 1935 | Not yet established |
| Tax exempt | § 501(c)(3) status | Not yet established |
| 5% payout rule | Not subject to | May have to payout 5% of assets |
| Excise Tax on investment income | Do not pay | May be subject to tax |
| Tax Deductibility for Donors | Maximum under law | Uncertain; provisional status if approved |
| Mechanism for Receiving Gifts | Established mechanisms to handle gifts of real estate, securities & cash | Need mechanisms for receiving and managing of gifts |
| Language for Making Gifts & Creation of Funds | In place | Must create |
| Sophisticated Gift Instruments (Pooled Income, Lead, Annuity, and Unitrusts) | In place | Must create |
| Office | In place | Need to obtain |
| Staffing | In place | Need to obtain |
| Accounting | Computerized & independent CPA audit conducted each year | Must employ |
| Tax Return (Attorney General & IRS) | Prepared by CPA | Must prepare |
| Public Report | Annual report to public (over 1,000 copies distributed) | May be required |
| Acknowledge Donors | Donors recognized in publications and thanked individually for each gift | Need systems |
| Director and Officer Liability | In place $3 million | Needed (costly and difficult to obtain) |
| Liability Insurance | In place $2 million | Needed |
| Employee Bonding | Yes | Needed |
| Investment of Assets | Professional Investment Committee | Need to obtain |
| Organization Overhead | Spread over all our assets | Start-up costs and costs spread over smaller asset base |
| Credibility | Wide public acceptance | New organization |
